Asia Roundup: Kiwi eases on RBNZ rate cut speculation; dollar declines against yen amid U.S.-China trade talk concerns, Asian shares plunge – Friday, February 8th, 2019

Market Roundup

  • No talks between Trump and China's Xi before trade deadline
  • Fed's Bullard: 'Restrictive' U.S. policy likely curbing inflation
  • Australia steps up warning on housing, cuts guidance
  • In Brussels, EU gives May glimpse of Brexit hope
  • UK firms hire fewer permanent staff for first time since 2016 – REC
  • Japan investors favor U.S., some euro zone debt in December
  • Japan Dec All Household Spending YY, 0.1%, 0.8% f'cast, -0.6% prev
  • Japan Dec All Household Spending MM, -0.1%, -0.2% f'cast, 1.1% prev
  • Japan Dec Current Account NSA (JPY), 452.88 bln, 429.88 bln f'cast, 757.28 bln prev
  • U.S. fund investors buy most junk bonds in more than 2 years -Lipper
  • Foreign CB US debt holdings +$12.861 bln to $3.426 tln Feb 6 week
  • Treasuries +$11.467 bln to $3.037 tln, agencies +$310 mln to $319.245 bln

Economic Data Ahead

  • (0200 ET/0700 GMT) Germany Dec Exports MM SA, 0.2% f'cast, -0.4% prev
  • (0200 ET/0700 GMT) Germany Dec Imports MM SA, 0.2% f'cast, -1.6% prev
  • (0200 ET/0700 GMT) Germany Dec Trade Balance (EUR) SA, 18.4 bln f'cast, 19.0 bln prev
  • (0245 ET/0745 GMT) France Dec Industrial Output MM, 0.6% f'cast, -1.3% prev

Key Events Ahead

  • (0700 ET/1200 GMT) Riksbank General Council meeting – Stockholm
  • (1315 ET/1815 GMT) FRB San Francisco's Mary Daly participates in conversation before Bay Area Council Economic Institute – San Francisco

FX Beat

DXY: The dollar index rallied, extending gains for the seventh consecutive session, as U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are expected to commence another round of trade talks in Beijing next week to push for a deal and avert a March 2 increase in U.S. tariffs on Chinese goods. The greenback against a basket of currencies trades 0.05 percent up at 96.58, having touched a high of 96.67 on Thursday, its highest since January 24. FxWirePro's Hourly Dollar Strength Index stood at 48.27 (Neutral) by 0500 GMT.

EUR/USD: The euro steadied after falling for four straight sessions on weaker-than-expected eurozone growth data and expectations that the European Central Bank will keep monetary policy accommodative this year. The European currency traded flat at 1.1340, having touched a low of 1.1324 on Thursday, its lowest since Jan. 25. FxWirePro's Hourly Euro Strength Index stood at -66.36 (Bearish) by 0500 GMT. Investors’ attention will remain on a series of data from the Eurozone economies, amid a lack of economic data from the U.S. docket. Immediate resistance is located at 1.1406 (January 17 High), a break above targets 1.1474 (December 21 High). On the downside, support is seen at 1.1324 (Feb. 7 Low), a break below could drag it till 1.1300.

USD/JPY: The dollar eased, extending previous sessions losses, amid uncertainties about the path of U.S.-China trade negotiations and broader worries about slowing global growth. The major was trading 0.05 percent down at 109.75, having hit a high of 110.16 on Monday, its highest since December 31. FxWirePro's Hourly Yen Strength Index stood at 141.86 (Highly Bullish) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, as U.S. economic calendar remains absolutely data empty. Immediate resistance is located at 109.95 (Jan. 25 High), a break above targets 110.47 (Dec. 31 High). On the downside, support is seen at 109.16 (Jan. 28 Low), a break below could take it lower at 108.80 (Jan. 30 Low).

GBP/USD: Sterling eased, reversing some of its previous session gains, on growing expectations that the United Kingdom is on course to leave the European Union on March 29 without a deal, unless British Prime Minister Theresa May can convince the EU bloc to reopen the agreement she reached in November. The major traded flat at 1.2948, having hit a low of 1.2854 on Thursday; it’s lowest since January 22. FxWirePro's Hourly Sterling Strength Index stood at 7.60 (Neutral) 0500 GMT. Immediate resistance is located at 1.3001 (January 17 High), a break above could take it near 1.3047 (November 13 High). On the downside, support is seen at 1.2879 (November 14 Low), a break below targets 1.2827 (November 12 Low). Against the euro, the pound was trading flat at 87.56 pence, having hit a low of 88.21 on Tuesday, it’s lowest since Jan. 22.

AUD/USD: The Australian dollar slumped to a 1-month low after the Reserve Bank of Australia underlined its dovish stance by downgrading forecasts for economic growth and inflation. The Aussie trades 0.3 percent down at 0.7080, having hit a low of 0.7060 earlier; it’s lowest since January 4. FxWirePro's Hourly Aussie Strength Index stood at -83.61 (Slightly Bearish) by 0500 GMT. Immediate support is seen at  0.7044 (Dec. 26 Low), a break below targets 0.7016 (Dec. 27 Low). On the upside, resistance is located at 0.7166 (January 24 High), a break above could take it near 0.7234 (January 11 High).

NZD/USD: The New Zealand dollar plunged to a 2-1/2 week low, amid speculation the Reserve Bank of New Zealand might sound more amenable to a rate cut at its policy meeting on Feb. 13. The Kiwi trades 0.1 percent up at 0.6753, having touched a low of 0.6729, its lowest level Jan. 22. FxWirePro's Hourly Kiwi Strength Index was at -86.07 (Slightly Bearish) by 0500 GMT. Immediate resistance is located at 0.6798 (Jan. 23 High), a break above could take it near 0.6832 (Jan. 14 High). On the downside, support is seen at 0.6706 (Jan. 22 Low), a break below could drag it below 0.6671 (Jan. 4 Low).

Equities Recap

Asian shares tumbled as investors remain concerned about a broadening global economic slowdown, amid absence of any positive signs for a resolution in the U.S.-China trade dispute.

MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 0.7 percent.

Tokyo's Nikkei eased 2.01 percent to 20,333.17 points, Australia's S&P/ASX 200 index declined 0.3 percent to 6,071.50 points

South Korea's KOSPI fell 1.2 percent to 2,176.29 points, Hong Kong’s Hang Seng traded 0.3 percent lower at 27,909.26 points.

Commodities Recap

Crude oil declined, expending previous session losses, weighed down by an economic slowdown, however, supply cuts led by producer cartel OPEC and U.S. sanctions against Venezuela limited downside. International benchmark Brent crude was trading 0.7 percent down at $61.16 per barrel by 0506 GMT, having hit a low of $60.58 on Thursday, its lowest since February 1. U.S. West Texas Intermediate was trading 0.8 percent lower at $52.14 a barrel, after falling as low as $51.77 on Thursday, its lowest since the January 28.

Gold prices steadied on worries that a prolonged U.S.-China trade war could worsen the global economic slowdown. Spot gold was trading flat at $1,309.13 per ounce by 0510 GMT, having touched a low of $1,302.71 on Thursday, its lowest level since Jan. 29. U.S. gold futures were unchanged at $1,313.10.

Treasuries Recap

The Australian government bonds rallied across the curve during Asian trading session on the Reserve Bank of Australia’s dovish Statement on Monetary Policy (SoMP), where it lowered its growth forecasts substantially and noted that probability of rate rise or cut more evenly balanced than previously. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell about 6 basis points to 2.089 percent (lowest since October 2016), the yield on the long-term 30-year bond also dipped 6 basis points to 2.65 percent and the yield on short-term 2-year slumped 7 basis points to 1.71 percent.

The Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries, with the two-year up 10 Canadian cents to yield 1.76 percent and the 10-year rising 46 Canadian cents to yield 1.87 percent. The two-year yield touched its lowest intraday since Jan. 3 at 1.758 percent.

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