FTSE +20 points at 7240
DAX +60 points at 11600
CAC +20 points at 4879
Euro Stoxx +15 points at 3300
The US dollar sold-off aggressively in the US session amid the US President-elect Donald Trump told the Wall Street Journal that the dollar was too strong against the yuan. The dollar plunged below 6.85 against the renminbi, before consolidating between 6.8489 and 6.8662 in Hong Kong.
The S&P500 and the Dow Jones closed the day 0.30% lower in New York. The US retailers rallied on Donald Trump’s hesitation regarding his cross border tax plan, yet the big US banks plunged by the most in seven months on rising speculations that the tax breaks would not happen as previously thought. Morgan Stanley (NYSE:MS) lost 3.79%, JPMorgan Chase & Co (NYSE:JPM) wrote-off 3.63%, as Goldman Sachs (NYSE:GS) slid 3.50%. We continue watching the US banks today. Goldman Sachs and Citigroup (NYSE:C) are due to announce earnings before the US open.
Citigroup strategists warned that the S&P500 could be ‘at risk of unwinding the post-election rally and moving back to $2’200’. The S&P500 closed at $2267.89 on Tuesday.
The broad based USD headwinds sent the AUD/USD straight into the mid-term bullish consolidation zone. The AUD/USD surpassed the critical 0.7510 (major 61.8% retracement on Nov 7th to Dec 22nd decline) and traded at 0.7567. The pair eased 0.28% in Sydney, on a wide-ranging USD recovery overnight. From a technical perspective, the positive breakout could encourage a further rise to 0.7630 (minor 76.4% retrace) before 0.7800 level. First line of support is eyed at 0.7503, the 200-day moving average.
The greenback pared losses against all of its G10 counterparts. The pound (-0.62%) slid the most against the dollar, while the EUR/USD (-0.26%) tested the critical mid-term resistance at 1.0707 (major 38.2% retracement on post-Trump USD rally). The euro bears and bulls are currently fighting to gain the 1.07 level. Clearing 1.0707/1.0715 resistances could encourage a further rise toward 1.0788/1.0820 (100-day moving average / Fibonacci 50% level), while a failure to break above should embolden a retreat to 1.0567/1.0560 (minor 23.6% retrace / 50-day moving average). Decent 1.0700 and 1.0750 options will be expired today and could give a hand to either buyers or sellers.
Gold traded higher in New York, just shy of an important mid-term level of $1219 (major 38.2% retracement on Jul-Dec decline). Trend and momentum indictors remain comfortably positive for a further rise toward $1240 and even to $1270 (100 and 200-day moving averages respectively). Support is building above $1200 level. Decent $1200 Call expiry should be supportive of the bulls.
The GBP/USD rose to 1.2416 after the UK PM Theresa May said that there will be a final parliamentary vote to give lawmakers a chance to voice their opinion on the UK’s exit from the EU’s single market. Although she pledged to quit the single market, hopes that May’s Brexit proposal would be solid, if not could be rejected by the Parliament wet the pound traders’ appetite. However, the hard Brexit talks will stay on the UK’s headlines and continue pressuring its currency downwards. Nevertheless, the GBPUSD could take a breather until a new wave of news hit the wires.
The FTSE 100 closed yesterday’s session 1.46% lower at 7220.38p on surging pound. The UK’s rolling index eased further to 7212p in early Asian trading, before recovering to 7240p. Meanwhile, the FTSE futures (+0.22%) firmed hinting at a stronger open in London.
On today’s agenda
The Bank of Canada (BoC) is due to announce its monetary policy decision later today and is expected to maintain the overnight rate unchanged at 0.50%.
The Eurozone and the US inflation data will be the major data highlights of this Wednesday. The Eurozone’s final inflation figures should be no surprise, yet a faster US inflation could revive the Federal Reserve (Fed) hawks and encourage a further US dollar correction across the board.
Fed Chair Janet Yellen will speak at the Commonwealth Club in San Francisco about ‘The Goals of Monetary Policy and How We Pursue Them’. We do not expect to hear any new, unpriced insight vis-à-vis the Fed’s Policy.