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Daily Brief

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Market focus shifts to economic data as retail sales are released

USD

The USD is trading in quiet ranges this morning as traders await the release of Retail Sales m-o-m December, which are expected to rise 0.3%, after previously rising 0.2%. After all the hype regarding the trade deal, the market reaction was less than expected. US equity markets were higher in trading yesterday and DOW Futures are pointing to a higher opening this morning as well of around 100 points. Expect the USD to remain bid against the JPY and GBP, and stable against the EUR.

EUR

The EUR/USD moved higher overnight as traders added risk after trade deal signing. The focus today will be the releases of the European Central Bank meeting minutes. ECB President Christine Lagarde, back in December chose to identify herself as an “owl”, rather than a hawk or a dove, as the owl is associated with wisdom. The release of the December meeting’s minutes should give traders some insight as to what to expect from the ECB moving forward. If the minutes show the continued concern over weak Eurozone growth, the EUR could come under pressure. 

GBP

The GBP continues to feel pressure in overnight trading as markets look at comments by Bank of England governor Saunders, who said: “an interest rate cut could be appropriate based on the current economic conditions, which include a slowdown in the labor market”. BOE meets on January 30, the day before Brexit, and traders are already beginning to price in a change in BOE monetary policy.

JPY

The USD/JPY traded higher overnight and begins today just off its overnight highs. Traders have exited safe haven trades for the moment. Japanese economic data disappointed yesterday with Machine Tool Orders for December coming in at 33.6%, y-o-y, after reporting at 37.9% the previous month. Bank of Japan Governor Kuroda said overnight that he won’t hesitate to “take additional measures on monetary policy” if risk continues to grow.

CAD

The Canadian Dollar moves higher again overnight as optimism over the long-awaited US-China trade agreement gave traders confidence in buying the loonie. Oil prices moved higher after the signing, which aided the commodity-based currency. The direction of the C$ will now be affected by the US retail sales report later this morning. 

CNY

Chinese Vice Premier said yesterday after he signed the trade agreement that “cooperation is the only correct option”, and “both sides need to solve problems through negotiation”. He said it was the correct choice for the US to remove China as a currency manipulator after the International Monetary Fund issued a report stating that China did not manipulate its exchange rate.

USD: Trade deal signed, market focus shifts to economic data as retail sales are released.

USD: Trade deal signed, market focus shifts to economic data as retail sales are released.

EUR: ECB minutes to be released today. EUR higher overnight.

EUR: ECB minutes to be released today. EUR higher overnight.

GBP: GBP pressured by poor economic data and dovish BOE comments.

GBP: GBP pressured by poor economic data and dovish BOE comments.

JPY: Risk-on sees USD/JPY trade higher.

JPY: Risk-on sees USD/JPY trade higher.

CAD: Canadian dollar moves higher as oil prices rise after trade agreement signing.

CAD: Canadian dollar moves higher as oil prices rise after trade agreement signing.

CNY: Removal of China as currency manipulator was correct choice according to Chinese VP Liu.

CNY: Removal of China as currency manipulator was correct choice according to Chinese VP Liu.

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