Events in China dominated trade in what is usually a quiet week into US payrolls, especially in the first week of the year! Where to start??
It is safe to safe to say that it has not been the familiar steady progression into the New year, and with US payrolls week usually a quiet run up, events in China have produced one of the more volatile introductions, dominating FX trade as it has across the board. Plenty of PBoC intervention after CNH extended through 6.75. The circuit breaker system was swiftly abandoned after being deployed twice this week. Stocks across the globe took a hammering as did commodities, with oil prices hitting 12 year lows – WTI to within 10 ticks of $32.0. USD/JPY and the AUD took the brunt of risk aversion, with the former dropping to 117.30. 117.00 was and still is key, with significant stops below. AUD/JPY came very close to taking out the 2015 lows, while the equivalent spot rate took out .7000. The CAD was hammered in line with oil, and after taking out the key 1.4000 mark on the way to 1.4170; we are left with a very open upside. ZAR and MXN hit record lows.
GBP was also a major underperformer, with Brexit fears and rate hike delays compounded by warnings of global risks on the UK economy – though this applies worldwide! All this ahead of US payrolls, which surprised on the upside at +292k. Looking to next week, all eyes will continue to be firmly fixed on stocks and oil. US data releases are all stacked up for Friday including Dec retail sales and industrial production. A mix of Fed speakers Monday through to Friday, and elsewhere, China trade numbers will also be one to watch mid week. BoE’s MPC meet next week, but no press conference - and no rate hike!