Currencies: EUR/USD testing range top ahead of the US payrolls
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- Howard Holt
- 5 years ago
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1 Rates: Big day ahead Today s eco calendar heats up with EMU CPI, US Payrolls and US non-manufacturing ISM. We have a positive intraday bias for core bonds especially if this week s risk/oil rally shows signs of fatigue. The risk scenario is a big upward surprise in the average hourly earnings components in the US payrolls report. Currencies: EUR/USD testing range top ahead of the US payrolls Yesterday, the dollar showed a mixed picture and couldn t fully profit from a very strong ADP labour market report. Today, EMU inflation is expected soft, but it isn t evident that this will break the strong euro momentum. The dollar probably needs very strong payrolls and, in particular strong wage data, to change fortunes. Calendar Headlines S&P Eurostoxx 50 Nikkei Oil CRB Gold 2 yr US 10 yr US 2yr DE 10 yr DE EUR/USD USD/JPY EUR/GBP US stock markets closed positively with Nasdaq slightly underperforming because of the Intel chip s flaws. Asian stock markets copy WS s positive risk sentiment with Korea and Japan outperforming. The Trump administration proposed opening up nearly all the country s offshore areas for oil and gas drilling, a move that would touch every coastal state, some that have been off limits to drillers for decades. Australia's trade deficit widened to A$628 million ($494 million) in November from a revised A$302 million a month earlier. Expectations were for an A$550 million surplus. AUD/USD slightly suffered, declining to UK shop prices slipped further into deflationary territory as retailers offered discounts on non-food products, according to the British Retail Consortium. The BRC-Nielsen shop price index found prices fell 0.6% Y/Y in December. China released new rules tightening bond trading regulations, with a focus on restricting leverage and banning under-the-table deals. North Korea accepted a proposal to hold talks with South Korea on Tuesday, reducing tensions as President Moon Jae-in s government prepares to host the Winter Olympics next month. Today s eco calendar heats up with EMU CPI data, US payrolls and US nonmanufacturing ISM. Fed Harker and Mester are scheduled to speak. P. 1
2 Rates Important day ahead! US yield -1d 2 1,95 0,02 5 2,27 0, ,45 0, ,79 0,00 DE yield -1d 2-0,61 0,01 5-0,21 0, ,43-0, ,26-0,01 Global core bonds took a different direction yesterday. The Bund gained some ground towards the end of the session while the US Note future ended nearly unchanged, ultimately reversing a dip following a stellar US ADP report. Today s pending eco data (EMU CPI, US payrolls and US non-manufacturing ISM) kept most investors cautious. Equity sentiment remained buoyant, especially in Europe, despite extensive media coverage about Intel s chip flaws. Brent crude managed to hold recent gains, stabilizing around $68/barrel. In a daily perspective, the German yield curve flattened with yield changes ranging between +0.6 bps (2-yr) and -1.1 bp (30-yr). The US yield curve shifted up to 2.3 bps (5-yr) higher. Peripheral bonds outperformed on intra-emu bond markets. The 10y Greek spread vs Germany dropped by 16 bps, the Portuguese one shed 6 bps and Spanish/Italian spreads declined by 5 bps. A strong Spanish auction was supportive together with general risk sentiment. Asian stock markets trade positive overnight in line with the US yesterday. Korea and Japan outperform while China lags. The US Note future and Brent crude stabilize, suggesting a neutral opening for the Bund. Today s eco calendar heats up. The first important release is EMU CPI. Consensus expects a decline in headline inflation from 1.5% Y/Y to 1.4% Y/Y and a pick-up in the core reading from 0.9% Y/Y to 1.0% Y/Y. Following the release of German, Spanish & Belgian December CPI readings and taking into account a huge base effect, we expect a below-or-on consensus outcome which could be slightly beneficial to the Bund. Any correction on this week s risk/oil rally argues in the same direction. The second item on the agenda are US payrolls. Consensus expects 188k net job growth in December. Strength in ADP-report, weekly claims and employment indices in several other indicators suggest upside risks. However, markets will probably focus on average hourly earnings (0.3% M/M, 2.5% Y/Y). A strongerthan-expected outcome could force a test/break of the low in the US Note future. Disappointing AHE will probably trigger rebound action towards and blow-off the downside alert. The unemployment rate is forecast to stabilize at 4.1%. The US non-manufacturing ISM has the final say, but yesterday s market reaction shows that activity data are far less important at this stage than price/inflation numbers. To conclude: we have a positive intraday bias for core bonds unless AHE are strong and beat consensus. This might prove an opportunity to sell-the-uptick. Medium term, we hold our bearish bias on core bonds. In yield terms, we eye a move to 0.63% for the German 10-yr yield and 2.64% for the US 10-yr yield. Af German Bund: some technical buying yesterday following the sell-off since mid-december US Note future: stronger earnings or higher inflation (later this month) necessary to test/break contract low P. 2
3 Currencies EUR/USD testing cycle top ahead of payrolls R2 1,2225-1d R1 1,2092 EUR/USD 1,2068 0,0053 S1 1,1713 S2 1,1554 R2 0,9307-1d R1 0,9033 EUR/GBP 0,8906 0,0016 S1 0,8690 S2 0,8657 The dollar showed a mixed picture yesterday. It returned most of Wednesday s gains against the euro. A very strong ADP labour report couldn t change fortunes in favour of the dollar. Strong growth prospects for EMU kept the euro well supported. EUR/USD tested the /92 range top, but a break didn t occur (close at ). At the same time, USD/JPY profited from slightly higher US yields and buoyant risk sentiment. The pair filled offers in the area and closed at The combined rise of both EUR/USD and USD/JPY propelled EUR/JPY above 136, the highest level since October The risk rally continues overnight, but the pace is easing a bit. The USD trading pattern persists. EUR/USD holds within reach of the 2017 top. USD/JPY maintains a good bid and tries to regain the 113 handle. The recent rally of the Aussie dollar was blocked as the country recorded an unexpected trade deficit in November. AUD/USD returned to the area. Today, the EMU December CPI is expected to have declined to 1.4% Y/Y from 1.5%. A big base effect is at play. An upward surprise looks unlikely. Question is whether a soft EMU CPI will block the recent strong euro momentum. In the US, the payrolls, the nonmanufacturing ISM, the trade balance and the order data will be published. Evidently, the focus will be on the payrolls and in particular on the wage data. The consensus expects a rise of 0.3% M/M and 2.5% Y/Y. This consensus probably needs to be met (or surpassed) to prevent further USD losses. Recently, the greenback suffered as the global recovery might force other major CB s (including ECB) to join policy normalisation. For now, we maintained the working hypothesis that enough good news on the euro/ bad news on the dollar was discounted and that a sustained break beyond the cycle top is not evident. Today s payrolls (wage data) might decide whether this approach remains valid. Yesterday, UK eco data had only a limited impact on sterling trading. The overall rise of the euro helped EUR/GBP to regain the 0.89 barrier. Cable (close ) gained slightly as the dollar held a soft bias. There are only second tier UK eco data today. Sterling is rather well bid this morning despite soft BRC shop price data. EUR/GBP struggles not the fall back below the 0.89 mark. We expect more sideways trading today. Recent UK data were mixed. We don t expect the BoE to raise interest rates soon. EUR/GBP /60 support looks solid. Euro strength or soft UK data might keep EUR/GBP 0.90 on the radar further down the road. We keep a EUR/GBP buy-on-dips in case of return action to EUR/USD holding near range top going into US payrolls report EUR/GBP: Consolidation continues. No sterling comeback for now P. 3
4 Calendar Friday, 5 January Consensus Previous US 14:30 Change in Nonfarm Payrolls (Dec) 190k 228k 14:30 Two-Month Payroll Net Revision (Dec) :30 Change in Private Payrolls (Dec) 193k 221k 14:30 Change in Manufact. Payrolls (Dec) 18k 31k 14:30 Unemployment Rate (Dec) 4.1% 4.1% 14:30 Average Hourly Earnings MoM / YoY (Dec) 0.3%/2.5% 0.2%/2.5% 14:30 Average Weekly Hours All Employees (Dec) :30 Labor Force Participation Rate (Dec) % 14:30 Underemployment Rate (Dec) % 14:30 Trade Balance (Nov) -$49.9b -$48.7b 16:00 ISM Non-Manf. Composite (Dec) :00 Factory Orders (Nov) 1.1% -0.1% 16:00 Durable Goods Orders (Nov F) % Canada 14:30 Net Change in Employment (Dec) 2.0k 79.5k 14:30 Unemployment Rate (Dec) 6.0% 5.9% Japan 00:50 Monetary Base YoY (Dec) A: 11.2% 13.2% 01:30 Nikkei Japan PMI Services (Dec) A: :30 Nikkei Japan PMI Composite (Dec) A: :00 Vehicle Sales YoY (Dec) A: -1.0% -5.4% UK 01:01 BRC Shop Price Index YoY (Dec) A: -0.6% -0.1% 10:00 New Car Registrations YoY (Dec) % 10:30 Unit Labor Costs YoY (3Q) % EMU 11:00 PPI MoM / YoY (Nov) 0.3%/2.5% 0.4%/2.5% 11:00 CPI Core YoY (Dec A) 1.0% 0.9% 11:00 CPI Estimate YoY (Dec) 1.4% 1.5% Germany 08:00 Retail Sales MoM / YoY (Nov) 1.0%/2.3% -1.0%/-1.4% France 08:45 Consumer Confidence (Dec) :45 CPI EU Harmonized MoM / YoY (Dec P) 0.4%/1.3% 0.1%/1.2% Italy 11:00 CPI EU Harmonized MoM / YoY (Dec P) 0.3%/1.1% -0.2%/1.1% Events 14:30 Revisions: Seasonally Adjusted Household Survey data 16:15 Fed's Harker Speaks on the Economic Outlook at AEA 18:30 Fed's Mester Speaks on Panel on Monetary Policy Coordination P. 4
5 10-year Close -1d 2-year Close -1d Stocks Close -1d US 2,45 0,01 US 1,95 0,02 DOW 25075,13 152,45 DE 0,43-0,01 DE -0,61 0,01 NASDAQ 7077,915 12,38 BE 0,65-0,01 BE -0,51 0,01 NIKKEI 23714,53 208,20 UK 1,23 0,02 UK 0,49 0,03 DAX 13167,89 189,68 JP 0,06 0,00 JP -0,14 0,00 DJ euro ,88 59,00 IRS EUR USD GBP EUR -1d -2d USD -1d -2d 3y 0,00 2,23 0,89 Eonia -0,3560 0,0000 5y 0,30 2,31 1,05 Euribor-1-0,3680 0,0000 Libor-1 1,5569 0, y 0,88 2,45 1,29 Euribor-3-0,3290 0,0000 Libor-3 1,6959 0,0000 Euribor-6-0,2710 0,0000 Libor-6 1,8427 0,0000 Currencies Close -1d Currencies Close -1d Commodities Close -1d EUR/USD 1,2068 0,0053 EUR/JPY 136,07 0,90 CRB 195,37 0,02 USD/JPY 112,75 0,24 EUR/GBP 0,8906 0,0016 Gold 1321,60 3,10 GBP/USD 1,3551 0,0035 EUR/CHF 1,1757 0,0017 Brent 68,07 0,23 AUD/USD 0,7864 0,0028 EUR/SEK 9,8195-0,0040 USD/CAD 1,2487-0,0049 EUR/NOK 9,7357-0,0019 If you no longer wish to receive this mail, please contact us: to unsubscribe Contacts Brussels Research (KBC) Global Sales Force Mathias van der Jeugt Brussels Peter Wuyts Corporate Desk Institutional Desk Dublin Research France Austin Hughes London Shawn Britton Singapore Prague Research (CSOB) Jan Cermak Prague Jan Bures Petr Baca Bratislava Research (CSOB) Marek Gabris Bratislava Budapest Research David Nemeth Budapest ALL OUR REPORTS ARE AVAILABLE VIA OUR KBC RESEARCH APP (iphone, ipad, Android) This non exhaustive information is based on short term forecasts for expected developments This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice. P. 5
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More informationRates: US stock market swoon triggers test of 2.8% support in US 10-yr yield
Rates: US stock market swoon triggers test of 2.8% support in US 10-yr yield A heavy sell-off in US tech shares pulled general stock markets lowers and lifted core bonds via safe have flows. US Treasuries
More informationHeadlines. Thursday, 03 January Rates: Core bonds start year on strong footing
Rates: Core bonds start year on strong footing A dismal Chinese manufacturing PMI set the tone for risk-off trading in Asia/Europe yesterday with Bunds and US Treasuries surging. Liquidity remained rather
More informationHeadlines. Tuesday, 05 March Rates: First 10y Greek bond sale in almost a decade. Currencies: EUR/USD correction off 1.14 resistance continues
Rates: First 10y Greek bond sale in almost a decade Yesterday s market correlations were very loose amid an empty eco/event calendar. The US non-manufacturing ISM spices trading today. We expect a strong,
More informationCurrencies: Sentiment data (ZEW) to ease euro downside pressure?
Rates: Looking for clues from the ECB US investors return after the long weekend, but the US eco calendar is razor-thin. EMU investors look for signs of improvement in the forward-looking German ZEW expectations
More informationBrent oil is holding under $45/ barrel after yet another decline during US trading hours yesterday.
Thursday, 22 June 2017 Rates: Core bonds remain resilient, partly because of oil sell-off Risk sentiment and oil prices could guide global trading. Core bonds can profit in a daily perspective if oil extends
More informationHeadlines. Friday, 18 January Rates: Eco data vs risk sentiment. Currencies: dollar shows mixed picture. EUR/USD to bottom out?
Rates: Eco data vs risk sentiment A WSJ article suggested that the US pondered dropping Chinese tariffs. Risk sentiment improved, even if the headlines were later denied by a US Treasury official. Downside
More informationCurrencies: Dollar struggles to extend gains even as core yields rise
Rates: Test of US 10-yr yield resistance ongoing Today s eco calendar contains German Ifo and US durable goods orders. We expect their impact to be of intraday importance at best ahead of tomorrow s ECB
More informationRates: Higher oil pushed Bunds lower, but US Treasuries resilient
Rates: Higher oil pushed Bunds lower, but US Treasuries resilient It looks like markets are awaiting the FOMC meeting before giving core bonds an eventual new direction. Core bonds remain under pressure,
More informationHeadlines. Wednesday, 13 September Rates: Can US eco data start a 2nd downleg in US T s this week?
Rates: Can US eco data start a 2nd downleg in US T s this week? Core bonds corrected lower since Friday afternoon as risk sentiment improved with new closing highs for main US equity indices. Technically,
More informationHeadlines. Monday, 13 November Rates: Side-lined ahead of central bankers and US eco data?
Rates: Side-lined ahead of central bankers and US eco data? Today s eco calendar remains uninspiring. We expect trading to be sentiment-driven and technical in nature. The downward equity correction hasn
More informationMarkets. Rates. Thursday, 10 November 2016
Thursday, November 6 Markets Rates 6 - Policy Rates,8,6,, -, -, EURIBOR M / USD LIBOR M ECB FED BOE ECB Deposit EURIBORM USD LIBOR M While ECB and BOE are expected to keep rates unchanged for a longer
More informationHeadlines. Tuesday, 10 January Rates: Oil main driver core bonds. Currencies: Dollar and sterling ceding ground. Calendar
Tuesday, 10 January 2017 Rates: Oil main driver core bonds. A declining oil price and fragile risk sentiment mainly benefited US Treasuries yesterday despite upcoming supply. Today s eco calendar remains
More informationCurrencies: Will payrolls be able to provide any guidance for USD trading
Rates: Developments on trade scene trump US payrolls Development on the US trade scene could underpin demand for core bonds going into the weekend and overshadow today s payrolls report. US President Trump
More informationMarkets. Rates. Wednesday, 13 September 2017
Wednesday, September 7 Markets Rates,, -, Policy Rates,,,8,6,, -, -, EURIBOR M / USD LIBOR M ECB FED BOE ECB Deposit EURIBORM USD LIBOR M The ECB delayed decisions on its APP to October. Sources suggested
More informationCurrencies: Key US data to decide on next directional USD move
Friday, 14 July 2017 Rates: US inflation data key with Fed comments in mind US inflation data will probably be determining for today s trading session. Recent warnings by several Fed governors suggest
More informationCurrencies: Payrolls to decide on next directional move of the dollar
Rates: Bar for payrolls too high after the intense sell-off? The sell off in US Treasuries accelerated this week and the bar for today s payrolls is high (200k consensus, decline in unemployment rate and
More informationsrates: More outperformance of German Bunds vs US Treasuries? Currencies: US-Canada trade deal to support further USD gains against other majors?
srates: More outperformance of German Bunds vs US Treasuries? The US, Mexico and Canada reached a last-minute agreement to revamp NAFTA. US equity futures gain ground, while the US Note future is a tad
More informationMarkets. Rates. Wednesday, 12 September 2018
Markets Wednesday, September 8 Rates,,, -, - Policy Rates,,, -, EURIBOR M / USD LIBOR M ECB FED BOE ECB Deposit EURIBORM USD LIBOR M At the latest meetings, both the Fed and ECB held rates stable. The
More informationHeadlines. Thursday, 20 December Rates: Fed doesn t live up to market expectations. Currencies: Markets flunk the Fed.
Rates: Fed doesn t live up to market expectations The Federal Reserve delivered a dovish hike yesterday: a policy rate hike of 25 bps but a lower median rate forecast for 2019 with 25 bps. Investors clearly
More informationHeadlines. Tuesday, 04 July Rates: Geopolitical tensions to give bonds some respite? Currencies: Risk-off to set the tone for FX trading?
Rates: Geopolitical tensions to give bonds some respite? Strong US ISM aborted a sluggish corrective upturn during the US session with US Treasuries now underperforming Bunds. Geopolitical tensions may
More informationHeadlines. Tuesday, 11 September Rates: Technically driven trading in absence of data/events
Rates: Technically driven trading in absence of data/events Tuesday, 11 September 2018 Today s eco calendar is empty apart from German ZEW investor sentiment which probably won t impact trading. We expect
More informationCurrencies: How long will USD maintain the benefit of the doubt?
Rates: Looking for new clues Technically-inspired and sentiment-driven trading characterizes core bond moves the past days. The thin eco/event calendar today and tomorrow, suggests more of the same. Italian
More informationCurrencies: dollar extends correction after rejected test of the recent highs
Rates: Treasuries correct higher, but eyes on US eco data The eco calendar heats up in the US with non-manufacturing ISM, ADP employment and weekly claims. Risks for the ISM are on the upside of expectations,
More informationCurrencies: EUR/USD slide continues as doubts on EU economy continue to weigh
Rates: Stuck in no man s land Global core bonds are stuck in no man s land following last month s decision by both the ECB and the Fed to stay side-lined in assessment mode for the next months. More range-bound
More informationCurrencies: Dollar shows no clear trend, but USD/JPY nears key support
Rates: US 10-yr yield closing in on 2.3% support Today s eco calendar won t inspire trading, suggesting sentiment-driven action. If yesterday s risk aversion persists, the US 10-yr yield could eventually
More informationCurrencies: Dollar maintains benefit of the doubt ahead of Powell speech
Rates: Downward intraday bias for core bonds Improved risk sentiment might weigh on core bonds. Italian media suggest that the EC is willing to accept a 2% Italian deficit for next year. This seems negotiable
More informationThursday, 06 October 2016 Headlines US Equities ended with modest gains yesterday,
Rates: ECB Tapering rumours prime on strong US ISM Bunds sharply underperformed US treasuries yesterday, still on the tapering story. Attention will now go to tomorrow s US payrolls release, suggesting
More informationHeadlines. Thursday, 02 November Rates: Core bonds little moved after Fed meeting. Currencies: Dollar fails to extend gains.
Thursday, 02 November 2017 Rates: Core bonds little moved after Fed meeting. The FOMC statement upgraded the economic situation to solid from moderate confirming its intention to raise rates in December.
More informationCommodity prices continue to fall as copper prices melted another
Tuesday, 17 November 2015 Rates: More sentiment-driven trading? US equities staged an impressive rally after European closure, putting US Treasuries under further downward pressure. Opening losses for
More informationHeadlines. Wednesday, 26 September Rates: Will the Fed s 2021 dot signal the end of the cycle? Currencies: will Fed convince USD bulls?
Rates: Will the Fed s 2021 dot signal the end of the cycle? The German 10-yr yield cleared the 0.5% mark. A sustained break in the weekly close opens a new trading band (0.5%-0.8%). US yields remain at/near
More informationHeadlines. Friday, 30 June Rates: German 10-yr yield ready for test of 0.5% Currencies: Dollar cannot find its composure.
Friday, 30 June 2017 Rates: German 10-yr yield ready for test of 0.5% EMU inflation could beat expectations, suggesting that the sell-off of the Bund can continue at least until the German 10-yr yield
More informationCurrencies: USD gains only modestly after approval of Senate tax bill
Monday, 04 December 2017 Rates: US political developments weigh on US Treasuries The US Note future loses ground this morning after the successful US Senate tax vote and the erroneous Flynn report. We
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