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Global market watch - 21st January 2020

The Greenback was mixed this morning as it pulled back from its highs yesterday versus the Euro, CAD, Sterling, and Swiss Franc in familiar and tight ranges, but improved to its 35-day best with the Aussie Dollar, a one-week high with the Kiwi, along with its 9-day best versus the Yuan on some concerning US-China trade news precipitating a moderation of risk tolerance.  US Treasury Secretary Steven Mnuchin had stated overnight that ‘phase two’ of the US-China trade deal may not roll back all tariffs which also was not well received.  A CNBC New Report (Yen Nee Lee – CNBC – 20 January 2020) quoted Richard Martin, managing director at IMA Asia stating there is some 50% probability the US-China ‘phase one’ agreement could fall apart in the first year.  The market also seemingly turned its attention back to impeachment proceedings and the upcoming election this year after the domestic MLK Bank Holiday. The Buck fell in tight ranges with most rivals but does remain firmer since the better than anticipated US Retail Sales number on Friday morning. There is no significant domestic economic data today, with HPI MoM scheduled for tomorrow.

The Canadian Dollar continues in very tight ranges with the Greenback as WTI crude prices dropped from a fresh 11-day high overnight to a four-day low this morning and risk tolerance weighed on new that a US-China ‘phase two’ deal may not see all US tariffs  rolled back while some analysts even surmised the ‘phase one’ agreement would not make it over the next year.  The Loonie fell to its four-day low with the Euro along with its one-week trough with the Yen today.  Manufacturing Sales MoM data was released just a touch below forecast at -0.6% compared to its -0.5% target but with an upward revision to -0.2% from -0.7% previous.  The key domestic CPI MoM release follows Wednesday first thing ahead of the always important Bank of Canada (BoC) monetary policy meeting at 10am, accompanied by NHPI MoM and Wholesales Sales MoM data for a busy release schedule coming tomorrow morning.

The Single Currency ticked up versus the Greenback and Loonie, but was a touch softer with the generally firmer Pound this morning.  Key German ZEW Economic Sentiment data rose an impressive 16 points to a 4.5-year peak of +26.7 compared to its +15.2 consensus and the 10.7 previous.  Eurozone ZEW was released at its 25-month best of +25.6 versus +16.3 target and the 11.2 previous as well. This is a combination of the US-China agreement coupled with rebounding economic sentiment.  Notably Eurozone inflation and growth are still less than impressive but data has been moderately better of late. There is no key EU data for Wednesday but the European Central bank (ECB) monetary policy meeting follows on Thursday morning.

Sterling improved moderately to multi-day peaks against most rivals on better than expected UK jobs data released this morning.  The key Average Hourly Earnings Index 3m/Y was released at +3.2% versus +3.1% consensus forecast, the Claimant Count was much better than expected at its 11-month best of 14.9K compared to its 33.4K target, while the Unemployment Rate stayed at its strong 3.8% low.  The market spent the London morning selling sterling and pricing in Chancellor Javid’s previous no-equivalence comments. The Prime Minister’s spokesman announced that there will be equivalence once the UK leaves the EU. It was also added that the UK government will set out in public what it seeks to achieve in a future partnership with the EU, which reflects a Canada-style free trade agreement. Yesterday, the IMF reported that the UK’s economy will outpace major European countries in 2020. They assume an orderly Brexit and a gradual transition to a new relationship with the EU.  CBI Industrial Order Expectations follows tomorrow.

The Greenback was a bit softer versus the Yen but USDJPY remains close to its fresh 8-month high from yesterday, while USDCHF was a touch higher as USD came off its peaks with EUR, GBP, CAD, and CHF from the session yesterday.  That said, the Greenback managed its 35-day peak with the Aussie Dollar, its one-week high with the Kiwi, along with its 9-day best with the Yuan on news that ‘phase two’ of US-China trade may not roll back all tariffs and comments form experts that even ‘phase one’ may have challenges in actually lasting for even one year.

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