Here are the latest developments in global markets:
- FOREX: Euro/dollar challenged the 1.23 key level, rising to fresh three-year highs during the early European session as investors were increasingly confident that the ECB would trim its balance sheet, while easing political uncertainties in Germany provided further support to the common currency. The dollar index extended its downtrend towards 90.44 (-0.56%), approaching three-year lows, while against the yen, the dollar dived to a four-month trough of 110.51 (-0.40%). The greenback’s weakness pushed the antipodean currencies ever higher, with the aussie and the kiwi surging near four-month peaks. Pound/dollar held onto gains as well, touching 1.3818 for the first time since referendum took place. On Friday, the pair gained positive momentum after reports that Spain and the Netherlands were willing to back a deal which promises close ties between the UK and the EU.
- STOCKS: A strengthening euro pressured eurozone stocks on Monday. The pan-European STOXX 600 was down by 0.14% at 1040 GMT. Healthcare and financials were among sectors dragging the index. The blue-chip Euro STOXX 50 was weaker by 0.25%, driven mainly by losses in utility shares. The German DAX 30 was down by 0.35%, while the British FTSE 100 retreated by 0.11% mainly due to weaker technological shares. In other news of the UK, the British construction firm Carillion collapsed after the government’s efforts to reach an agreement with the company’s creditors failed. Even if Carillion shares trade off the FTSE 100, banking sectors listed in the index might have seen some losses arising from the news.
- COMMODITIES: Oil prices were slightly down during midday European session, not far away from three-year peaks reached last week. WTI crude stood at $64.17 per barrel ( -0.06%) and Brent was last seen at $69.78 (-0.17%). Gold consolidated gains around $1,342 per ounce after reaching a fresh four-month high earlier in the day.
Day ahead: New Zealand reports on business confidence and electronic retail sales
Data releases will be limited to the remaining of the day as US markets will be closed for Martin Luther King Jr. Day. Investors, though, will keep a close eye on the kiwi to see whether today’s figures on business confidence (2100 GMT) and electronic card retail sales (2145 GMT) will add further gains to the currency.
Regarding New Zealand’s business confidence, it will be interesting to see whether the business outlook continued to deteriorate in the fourth quarter of 2017, as the index has been slowing down since the beginning of the year when it touched a 2½-year high. In the third quarter, the measure hit the lowest growth mark seen in 2017, rising by 5.0%.
On the other hand, electronic transactions in New Zealand increasingly grew from September onward, reaching a 10-month high of 1.2% m/m in December. If the measure continues to extend its uptrend, this would mirror further improvements in consumption and constitute a positive contribution to the country’s economic expansion.
The euro will be in the spotlight as well, with traders waiting for any political updates in Germany the following weeks. Note that Merkel’s Conservatives managed to make progress on coalition talks with their former partners, the Social Democrats last week, sending negotiations to the next level. The Social Democrats said on Sunday they would make efforts to improve the blueprint and gain the trust of their skeptical members, hoping for a deal at a congressional meeting on January 21, when a vote on the agreement will take place. Formal negotiations will be able to start only if the vote is positive.
Investors will also keep a close eye on several earnings reports due this week which have the potential to move stock markets.