US Open Preview– Dollar dives after China said to hold back on US Treasuries; Oil waits for EIA report

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  • US Open Preview– Dollar dives after China said to hold back on US Treasuries; Oil waits for EIA report

    Here are the latest developments in global markets:

    • FOREX: The dollar took a knock after Chinese officials recommended to slow down or cut purchases of US Treasuries according to Bloomberg. The dollar stretched its losses toward a two-week low of 111.29 (-1.08%) versus the yen and sank marginally below the 92-key level regarding its index against six major currencies (-0.46%). The euro advanced on the news, flying from $1.1930 to $1.2000 (+0.60%), while the pound erased earlier losses, rebounding to an intra-day high of $1.3558. The antipodean currencies also bounced higher, with the kiwi winning the most among its peers. Kiwi/dollar touched a three-month high at $0.7228 (+0.78%). The Swedish krona rose by 0.70% to 8.07 per dollar supported by Riksbank’s meeting minutes which confirmed that a monetary tightening was on the way. Note that in December the Swedish central bank signaled the end of negative interest rates. However, the minutes showed that policymakers were cautious about the timing and the speed of the policy adjustment.
    • STOCKS: A rise in 10-year US Treasury yields as well as in Germany’s 10-year bond yields stressed stocks trading in Europe on Wednesday. The pan-European STOXX 600 was down by 0.44% at 1130 GMT, with all sectors being in the red except financial and energy sectors, while the blue-chip Euro STOXX 50 slipped by 0.32%. The German DAX 30 declined by 0.74%, while the British FTSE 100 and the Spanish IBEX 35 were moving sideways. US stock futures were pointing to a positive opening.
    • COMMODITIES: After yesterday’s strong rally underpinned by declining US oil inventories and ongoing OPEC-led supply cuts, oil prices paused their uptrend near three-year highs during Wednesday’s early European trading hours. WTI crude was 0.67% higher at $63.38 per barrel and Brent increased by 0.38% to $69.08. Gold surged to a five-day high of $1,320.76 per ounce on the back of a weaker dollar.

    US Open Preview– Dollar dives after China said to hold back on US Treasuries; Oil waits for EIA report

    Day ahead: Fed policymakers to deliver further speeches; EIA report pending

    Public speeches by a handful of central bankers will dominate economic events later on Wednesday, while data releases will be limited.

    At 1330 GMT the US will report on the import price index for the month of December, with analysts seeing the gauge rising by 0.4% m/m below the previous mark of 0.7%. Export prices are also said to come in softer in the aforementioned period, expanding by 0.3% m/m compared to 0.5% seen in the prior month. However, the former will attract a greater attention as higher import costs are likely to have a stronger effect on inflation and therefore have the potential to influence rate hike probabilities.

    At the same time, Canada will be publishing readings on building permits. In October, the number of new building permits jumped by 3.5% m/m but for November, forecasts are for the measure to decline by 0.3%.

    Next on the calendar, US wholesale inventories due at 1300 GMT are expected to continue rising at October’s pace of 0.7% m/m in November.

    Regarding public appearances, Chicago Fed President Charles Evans and Dallas Fed President Robert Kaplan will hold discussions at 1400 GMT and 1410 GMT respectively. Kaplan will also give a speech at 1315 GMT.

    James Bullard, St. Louis Fed President will give a presentation on the US economy and monetary policy at 1830 GMT.

    In the UK, the BOE Deputy Governor Ben Broadbent will answer questions on central bank policy on BBC radio at 1300 GMT.

    In energy markets, investors will wait for the EIA report which tracks the weekly change in the US oil inventories to come into view at 1530 GMT.

    US Open Preview– Dollar dives after China said to hold back on US Treasuries; Oil waits for EIA report

    Source: Trade Forex with XM.

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