Pound Higher on Labor News – 22 January 2019

News that the UK labor market was stronger than had been predicted helped to briefly lift the Pound Sterling out of the doldrums. According to the UK Office of National Statistics, the average earnings including bonus for the three month period through to November 2018 rose to 3.4%, slightly better than the flat rate of 3.3% which has been predicted. At the same time, the ILO’s unemployment rate unexpectedly fell to 4.0% from 4.1%, while forecasters had believed that the rate would remain unchanged. That helped to improve Pound sentiment, especially given the uncertainty over the looming Brexit and the current economic slowdown.

As reported at 11:32 am (GMT) in London, the GBP/USD was trading higher at $1.2908, a gain of 0.10% and off the session peak of $1.2928. The EUR/GBP was lower at 0.8799 Pence, down 0.18% and off the session trough of 0.87912 Pence while the high was pegged at 0.88286 Pence.

Hopes Pinned on Market-friendly Brexit

Currency strategists have been holding out hope that the Prime Minister will be able to push some sort of a deal through on the Brexit; the threat of a no-deal was seen as the most devastating of all possible outcomes. Theresa May is likely to agree to additional concessions in an effort to put an agreement on the table that the British Parliament will finally approve. FX traders still feel that a market-friendly outcome is possible, but the threat of crashing out entirely without a plan has not been completely dismissed.

Markets Struggle with Trade Uncertainty – 23 January 2019

Asian markets were trading mixed on Wednesday afternoon, as traders remained cautious in the face of continued trade tensions between the United States and China. According to reports from CNBC, Washington has declined a trade planning meeting with China that was expected to be scheduled for this week. The report claims that the meeting was cancelled due to lingering disagreements about intellectual property rules. Another meeting is expected to be held at the end of the month, in the hopes of advancing a mutually-agreeable trade agenda that will be confirmed before the March 1 deadline after which U.S. President Donald Trump has said that he will implement new tariffs.

South Korea’s Kopsi was trading up 0.31 percent as of 2:29 p.m. HK/SIN on Wednesday, and China’s Shenzhen Composite was up 0.09 percent. All other major indexes were trading lower. The Shanghai Composite was down 0.14 percent, Australia’s ASX 200 was down 0.26 percent and Japan’s Nikkei 225 was down 0.14 percent. The losses in Japan were tempered by the lower yen.

The mixed trading in Asia came after all three major Wall Street indexes closed down on Tuesday.

Currency Movements

The U.S. dollar soared 0.29 percent against the yen on Wednesday, trading at 109.68. The yen also fell 0.5 percent against the Australian dollar. The Bank of Japan announced on Wednesday that it would be keeping monetary policy stable, and it trimmed its inflation forecast due to a larger-than-expected decline in December exports which highlighted the need to continue supporting the economy.

The dollar index was trading flat on Wednesday afternoon in Asia, with the greenback gaining modestly against the dollar but losing ground against the euro.

Yen Broadly Higher on Growth Fears

The US Dollar held close to a 2-week peak versus its key rivals as worries grow over the news that the Chinese economy has slowed to a 28-year low. That news pushed FX traders toward safe haven currencies, with the Japanese Yen being the prime beneficiary of investor sentiment. In support of those concerns, the International Monetary Fund yesterday lowered its global growth forecasts for this year and the next, specifically citing the growth slowdown in China as well as the Eurozone. They further commented that the resolution to the trade tensions was vital in order to prevent further destabilization of the global economies.

As reported at 10:56 am (JST) in Tokyo, the USD/JPY was trading at 109.518 Yen, a loss of 0.0949%; the pair is moving off the session trough of 109.498 Yen. The EUR/JPY is lower at 124.513 Yen, down 0.10%; the pair has ranged from 124.500 Yen to 124.7410 Yen. The GBP/JPY is also lower at 141.178 Yen, down 0.10%, and just a few pips off the earlier low of 141.167 Yen.

Dollar Outlook Uncertain

The slowdown in China and the impact on global growth has led to speculation that the Federal Reserve Bank might also call a halt to its tightening cycle. One currency strategist in Tokyo said that that is likely to result in a softer US Dollar which, as of now, is over-valued based on the fundamentals.

Market Movers for January 22, 2019 – 22 January 2019

On Tuesday, January 22, 2019, the markets will be concerned with the release of economic calendar data, which usually results in changes in price movements. The economic agenda is a key tool for the fundamental analysis of the news to predict the performance of the markets. Therefore, caution must be taken to determine the results of these actual data to make the right decision in trading.

UK Payroll: Total British wages, including bonuses, rose at an annualized rate of 3.3 percent to £528 a week for three months prior to October last year, after adjusting the figure for the previous period up to a gain of 3.1 percent. Analysts’ estimates exceeded 3.0 percent. Total wages rose at the fastest rate in three months to July 2008. Pay growth in the private and service sectors increased. However, it has advanced at the same rate in construction, retail, wholesale, hotels and restaurants. In the public sector and manufacturing industries, wage growth slowed.

Excluding bonuses, wages rose 3.3 percent to £495 a week, the highest rate since the end of 2008, after a 3.2 percent increase in the previous period. This was in line with analysts’ expectations. In terms of real value, wages including bonuses rose by 1.1 percent, while wages excluding bonuses rose by 1.0 percent.

The wage growth forecast for the three months to November 2018: 3.3 percent.

New Zealand Consumer Price Index: Consumer prices rose 0.9 percent in the third quarter of last year and 1.9 percent year-on-year. Analysts had expected inflation to rise to 0.7 percent in the quarter and 1.7 percent year-on-year in the third quarter of 2018. This figure is slightly lower than the RBNZ target of 1.0 percent to 3.0 percent. The increase was supported by transportation, residential and household facilities, residential rents, construction sectors and food prices.

Expectations for the fourth quarter of last year: consumer prices are expected to remain unchanged.

Dollar Mixed in Asian Trade

The US Dollar Index, used by investors to gauge the relative strength of the greenback against major peers, was lower but remained close to a 2-week peak as an improvement in risk appetite helped to push yields on US Treasuries higher. Analysts say that three key factors have helped the sentiment shift; specifically, optimism that a no-deal Brexit will be avoided, a dovish outlook from the Federal Reserve, and easing in the trade tensions between the US and China. The only possible “fly in the ointment” for the Dollar, at least according to one currency strategist, is the looming release of earnings reports.

As reported at 10:55 am (JST) in Tokyo, the USD/JPY was trading at 109.6790 Yen, down 0.0847%. The AUD/USD pair was trading at $0.7175, a gain of 0.07%, while the NZD/USD was trading higher at $0.6733, down 0.07%. The US Dollar Index was trading at 96.2760 .DXY, down 0.06% and off the peak of 96.394 .DXY.

Market Movers Ahead for Euro, Pound and Kiwi

In economic news, later today markets will watch for the release of producer price inflation data from Germany which is expected to be lower. Tomorrow, markets will focus on employment data from the UK; currently, analysts are predicting that average earnings for the three month period through January will be flat, both with and without bonuses. Later on Tuesday, Statistics New Zealand will release consumer inflation data for the 4th quarter of 2018 which is expected to fall to 0.0% from 0.9%.

Yen Broadly Higher on Growth Fears – 22 January 2019

The US Dollar held close to a 2-week peak versus its key rivals as worries grow over the news that the Chinese economy has slowed to a 28-year low. That news pushed FX traders toward safe haven currencies, with the Japanese Yen being the prime beneficiary of investor sentiment. In support of those concerns, the International Monetary Fund yesterday lowered its global growth forecasts for this year and the next, specifically citing the growth slowdown in China as well as the Eurozone. They further commented that the resolution to the trade tensions was vital in order to prevent further destabilization of the global economies.

As reported at 10:56 am (JST) in Tokyo, the USD/JPY was trading at 109.518 Yen, a loss of 0.0949%; the pair is moving off the session trough of 109.498 Yen. The EUR/JPY is lower at 124.513 Yen, down 0.10%; the pair has ranged from 124.500 Yen to 124.7410 Yen. The GBP/JPY is also lower at 141.178 Yen, down 0.10%, and just a few pips off the earlier low of 141.167 Yen.

Dollar Outlook Uncertain

The slowdown in China and the impact on global growth has led to speculation that the Federal Reserve Bank might also call a halt to its tightening cycle. One currency strategist in Tokyo said that that is likely to result in a softer US Dollar which, as of now, is over-valued based on the fundamentals.

Dollar Mixed in Asian Trade – 21 January 2019

The US Dollar Index, used by investors to gauge the relative strength of the greenback against major peers, was lower but remained close to a 2-week peak as an improvement in risk appetite helped to push yields on US Treasuries higher. Analysts say that three key factors have helped the sentiment shift; specifically, optimism that a no-deal Brexit will be avoided, a dovish outlook from the Federal Reserve, and easing in the trade tensions between the US and China. The only possible “fly in the ointment” for the Dollar, at least according to one currency strategist, is the looming release of earnings reports.

As reported at 10:55 am (JST) in Tokyo, the USD/JPY was trading at 109.6790 Yen, down 0.0847%. The AUD/USD pair was trading at $0.7175, a gain of 0.07%, while the NZD/USD was trading higher at $0.6733, down 0.07%. The US Dollar Index was trading at 96.2760 .DXY, down 0.06% and off the peak of 96.394 .DXY.

Market Movers Ahead for Euro, Pound and Kiwi

In economic news, later today markets will watch for the release of producer price inflation data from Germany which is expected to be lower. Tomorrow, markets will focus on employment data from the UK; currently, analysts are predicting that average earnings for the three month period through January will be flat, both with and without bonuses. Later on Tuesday, Statistics New Zealand will release consumer inflation data for the 4th quarter of 2018 which is expected to fall to 0.0% from 0.9%.

Weekly Economic and Political Timeline – 20 January 2019

This week will see some key activity, with central bank input from the ECB and the Bank of Japan, as well as important data releases primarily concerning China and New Zealand.

The market is likely to be most active on Wednesday and Thursday.

Monday is a public holiday in the U.S.A.

Euro

It will be an important week for the Euro, with the Main Refinancing Rate and ECB Press Conference due on Thursday.

Japanese Yen

It will be an important week for the Yen, with the Bank of Japan’s Outlook Report, Monetary Policy Statement, and Press Conference due on Wednesday.

Chinese Yuan

It will be an important week for the Yuan, with Chinese GDP data due on Monday.

British Pound

It will be a quiet week for the British Pound, with nothing due except the Average Earnings Index on Tuesday.

Australian Dollar

It will be a relatively quiet week for the Aussie, with nothing due except Unemployment Rate and Employment Change data due on Thursday.

New Zealand Dollar

It will be a potentially important week but slow week for the Kiwi, with nothing due except CPI data on Wednesday.

Canadian Dollar

It will be a quiet week for the Loonie, with nothing due except Core Retail Sales data on Wednesday.

Sterling Lifted on Hope for Better Outcome

Sterling remained not far from the recently struck 2-month peak against both the US Dollar and the Euro on investor uncertainty. Yesterday, the Prime Minister managed to eke out favor in yet another no-confidence vote, but analysts say, despite that, there are grave concerns over her ability to oversee a very divided government. They say markets seem to be waiting for some more concrete information that would suggest that the worst case Brexit scenario is not likely to soon occur, however, until this data shows up support for the Pound will continue to be whittled away.

As reported at 11:44 am (GMT) in London, the EUR/GBP was trading at 0.8841 Pence, down 0.08%; the pair has ranged from 0.88317 Pence to 0.88702 Pence. The GBP/USD was trading at $1.2899, up 0.16%; earlier , the pair had hit a peak of $1.2911 while the low was established at $1.2833 for the trading session.

Uncertainty Dominates Brexit Future

Though the Prime Minister had met with party officials, the head of the Labour Party refused to come to the table. Jeremy Corbyn said unless Ms. May took the no-Deal Brexit out of play, he would not negotiate. One currency strategist said that different outlooks are garnering some appeal to investors, which include a softer Brexit and even, at the most extreme, a second referendum on the withdrawal. Most seem to be in favor of a delay for the exit so there is more time to fine-tune the details.

Dollar Higher on Trade Talk Hopes

The US Dollar gained some support against the Japanese Yen during Friday trade in Asia on renewed optimism that the trade talks between the US and China are exhibiting signs of progress. Yesterday, the Wall Street Journal had reported that Steve Mnuchin, the Secretary of the Treasury, was considering lowering Chinese import tariffs; that news, which was subsequently rebuked by a spokesman from the Treasury Department, helped to improve sentiment nonetheless. Later this month, China’s Vice Premier will be visiting the US to continue the discussion with US counterparts with a goal to resolving some of the long-standing trade issues.

As reported at 10;32 am (JST) in Tokyo, the USD/JPY was trading at 109.3340 Yen, a gain of 0.1236%; the pair is off the session peak of 109.398 Yen, while the low stands at 109.060 Yen. The AUD/USD was higher at $0.72, up 0.16%; the pair has ranged from a low of 0.71681 Yen to a high of 0.72053 Yen in today’s trading day. The NZD/USD is up at $0.6767, a rise of 0.20%, and off the session high of $0.67747.

Fundamental Events Ahead

Ahead in the trading day, markets will look for any news coming from the G20 economic summit in Osaka, Japan. Given the continuing differences of opinion between the US and China as regards trade, analysts will be watching for any positive news to come out of the meeting. Also ahead in the trading day is the release of industrial production and capacity utilization figures in December from Japan. That will be followed by the release of GDP figures from the UK which are expected to be flat on an annualized basis and show a marked decline on a monthly basis. Figures on US industrial production and capacity utilization will also be coming out late on Friday.