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Asia Roundup: Aussie eases on RBA rate cut speculation, greenback gains as Fed Powell emphasis strength in labour market, Asian shares rebound – Friday, December 7th, 2018

Market Roundup

  • White House, Trudeau seek to distance themselves from Huawei move
     
  • Tariffs have hit confidence, to slow U.S. economy -Fed's Williams
     
  • Fed's Powell: U.S. economy performing 'very well' though benefits uneven
     
  • Merkel's party votes for new leader, and new era in Germany
     
  • Oil drops as OPEC makes supply cut dependent on Russian support
     
  • Lawmakers propose N. Irish amendment to May's Brexit deal -BBC
     
  • UK 30-year bonds head for biggest weekly gain since 2009 as stocks plunge
     
  • Japan Oct real wages fall for 3rd straight month
     
  • Foreign CB US debt holdings + $2.107 bln to $3.403 tln Dec 5 week
     
  • Treasuries -$9 mln to $3.028 tln, agencies + $1.499 bln to $308.343 bln
     
  • Japan Oct All Household Spending YY, -0.3%, 1.4% f’cast, -1.6% prev
     

Economic Data Ahead

  • (0200 ET/0700 GMT) Germany Oct Industrial Output MM, 0.3% f'cast, 0.2% prev
     
  • (0245 ET/0745 GMT) France Oct Current Account, -1.9 bln prev
     
  • (0245 ET/0745 GMT) France Oct Industrial Output MM, 0.7% f'cast, -1.8% prev
     
  • (0330 ET/0830 GMT) Great Britain Nov Halifax House Prices MM, 0.5% f'cast, 0.7% prev
     
  • (0330 ET/0830 GMT) Great Britain Nov Halifax House Price 3M/YY, 1.0% f'cast, 1.5% prev
     
  • (0400 ET/0900 GMT) Italy Oct Retail Sales SA MM, -0.80% prev
     
  • (0500 ET/1000 GMT) EZ Q3 Employment Overall Final, 158,285.6k prev
     
  • (0500 ET/1000 GMT) EZ Q3 Employment Final YY, 1.3% f'cast, 1.3% prev
     
  • (0500 ET/1000 GMT) EZ Q3 GDP Revised QQ, 0.2% f'cast, 0.2% prev
     
  • (0500 ET/1000 GMT) EZ Q3 GDP Revised YY, 1.7% f'cast, 1.7% prev
     

Key Events Ahead

  • (0330 ET/0830 GMT) ECB Executive Board Member Benoit Coeure speaks at a meeting in Frankfurt
     
  • (1215 ET/1715 GMT) Fed Board Governor Lael Brainard speaks on “Financial Stability” at an event in Washington

FX Beat

DXY: The dollar index rebounded amid expectations the Federal Reserve will raise interest rates again at its Dec. 18-19 meeting, after Fed Chairman Jerome Powell emphasized the strength of the labour market late Thursday. However, the upside appears limited as investors focus on how much further it might raise rates and whether a pause is imminent. The greenback against a basket of currencies trades 0.1 percent up at 96.88, having touched a low of 96.38 on Tuesday, its lowest since Nov 22. FxWirePro's Hourly Dollar Strength Index stood at 3.75 (Neutral) by 0500 GMT.

EUR/USD: The euro edged down, as the greenback surged after Atlanta Federal Reserve Bank President Raphael Bostic stated that he felt the central bank should continue raising rates towards a neutral level, as the U.S. economy remained strong despite increasing uncertainties. The European currency traded 0.05 percent down at 1.1373, having touched a high of 1.1418 on Tuesday, its highest since Nov. 23. FxWirePro's Hourly Euro Strength Index stood at -36.99 (Neutral) by 0500 GMT. Investors’ attention will remain on German industrial production, EZ Q3 gross domestic product s.a., ahead of the U.S. nonfarm payrolls, unemployment rate, wholesale inventories, trade balance, consumer credit change, and speeches from Fed policymakers. Immediate resistance is located at 1.1401 (November 29 High), a break above targets 1.1433 (November 22 High). On the downside, support is seen at 1.1305 (November 30 Low), a break below could drag it till 1.1263 (November 26 Low).

USD/JPY: The dollar steadied after falling to an over 1-month low in the previous session, after the U.S. companies likely maintained a solid pace of employment in November while increasing wages for workers, indicating the economy remains strong enough for the Federal Reserve to continue hiking interest rates in 2019. The major was trading 0.2 percent up at 112.88, having hit a low of 112.23 on Thursday, its lowest since October 29. FxWirePro's Hourly Yen Strength Index stood at 46.53 (Neutral) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. nonfarm payrolls, unemployment rate, wholesale inventories, trade balance, consumer credit change, and speeches from Fed policymakers. Immediate resistance is located at 113.23 (November 22 High), a break above targets 113.50 (November 6 High). On the downside, support is seen at 112.42 (November 19 Low), a break below could take it lower 111.82 (October 25 Low).

GBP/USD: Sterling eased, halting a 2-day winning streak, amid growing concerns on how the British parliament votes on Prime Minister Theresa May's Brexit deal next week. The major traded 0.1 percent down at 1.2767, having hit a low of 1.2658 on Tuesday; it’s lowest since June 2017. FxWirePro's Hourly Sterling Strength Index stood at 112.94 (Highly Bullish) 0500 GMT. Investors’ attention will remain on developments surrounding Brexit deal, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2809 (November 30 High), a break above could take it near 1.2884 (November 19 High). On the downside, support is seen at 1.2725 (November 27 Low), a break below targets 1.2699 (December 6 Low). Against the euro, the pound was trading 0.1 percent down at 89.05 pence, having hit a low of 89.44 on Tuesday, it’s lowest since Nov. 19.

AUD/USD: The Australian dollar slumped, extending losses for the fourth straight session, as investors priced in a small chance of an interest rate cut following disappointing economic growth data yesterday, despite the Reserve Bank of Australia repeatedly stating that its rates will remain at historic lows for some time to come. The Aussie trades 0.1 percent down at 0.7229, having hit a low of 0.7191 on Thursday; it’s lowest since November 14. FxWirePro's Hourly Aussie Strength Index stood at -148.27 (Highly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7199 (November 27 Low), a break below targets 0.7164 (November 13 Low). On the upside, resistance is located at 0.7268 (November 22 High), a break above could take it near 0.7325 (November 19 High).

NZD/USD: The New Zealand dollar steadied, after falling to a 1-week low in the previous session, as risk sentiment slightly improved across the board. The Kiwi trades 0.05 percent down at 0.6879, having touched a high of 0.6969 on Tuesday, its highest level June 15. FxWirePro's Hourly Kiwi Strength Index was at -30.37 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6976 (June 15 High), a break above could take it near 0.7023 (May 31 High). On the downside, support is seen at 0.6816 (November 9 Low), a break below could drag it below 0.6753 (November 27 Low).

Equities Recap

Asian shares rebounded as investor risk sentiment improved amid speculation the Federal Reserve might pause U.S. rate hikes after December meeting.

MSCI's broadest index of Asia-Pacific shares outside Japan traded gained 0.4 percent.

Tokyo's Nikkei rose 0.7 percent to 21,653.05 points, Australia's S&P/ASX 200 index surged 0.4 percent to 5,681.50 points and South Korea's KOSPI rallied 0.5 percent to 2,078.80 points.

Shanghai composite index fell 0.2 percent to 2,601.91 points, while CSI300 index traded 0.1 percent down at 3,178.01 points.

Hong Kong’s Hang Seng traded 0.1 percent lower at 26,175.44 points. Taiwan shares added 0.8 percent to 9,760.80 points.

Commodities Recap

Crude oil prices declined to an over 1 percent, weighed down by OPEC's decision to delay a final decision on output cuts, awaiting support from non-OPEC Russia. International benchmark Brent crude was trading 1.0 percent down at $59.63 per barrel by 0451 GMT, having hit a high of $63.56 on Tuesday, its highest since November 22. U.S. West Texas Intermediate was trading 0.9 percent down at $51.21 a barrel, after rising as high as $54.54 on Tuesday, its highest since the November 22.

Gold prices surged and were headed for their best week in 15, as investors awaited U.S. nonfarm payroll data for clues about the health of the labour market. Spot gold was 0.1 percent up at $1,239.80 per ounce by 0456 GMT, having touched a high of $1,244.22 on Thursday, its highest level since July 17. U.S. gold futures were up 0.1 percent at $1,244.6 per ounce.

Treasuries Recap

The Japanese 10-year government bond yield jumped on the last trading day of the week following an improvement in the country’s household spending for the month of October, albeit surprising market participants who expected a rise compared to same period last year. The yield on the benchmark 10-year JGB note, which moves inversely to its price, jumped 6 basis points to 0.060 percent, the yield on the long-term 30-year note rose nearly 1-1/2 basis points to 0.800 percent and the yield on short-term 2-year surged 9 basis points to -0.140 percent by 05:40GMT.

The Australian government bonds traded narrowly mixed across the curve during Asian session as investors remain sidelined in any big deal amid lack of any major domestic events. Still, the sentiment was weighed down after the arrest of Huawei’s CFO raised concerns of inflaming US-China tensions. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 1/2 basis point to 2.464 percent, the yield on the long-term 30-year bond also climbed 1/2 basis point to 2.994 percent and the yield on short-term 2-year down 1/2 basis point to 1.930 percent.

The Canadian government bond prices were higher across the yield curve, with the 10-year rising 43 Canadian cents to yield 2.084 percent. The 10-year yield touched its lowest intraday since Dec. 28 at 2.026 percent.


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