Market Drivers January 22, 2019
Europe and Asia
- GBP U.K. Labor Avg. Weekly earnings 3.3 vs. 3.3%
- GBP U.K. Unemployment 4.0% vs. 4.1%
North America
- CAD Wholesale Sales 8:30
- U.S. Existing Home Sales 10:00
A slight risk-off tilt to the FX markets tonight with high beta currencies falling 20 to 30 pips from Asia open as Huawei (SZ:002502) news clearly aggravated investor sentiment.
Canada announced that the U.S. will proceed with extradition request for Huawei CFO, no doubt ratcheting tension between China and the West even as U.S.-China talks continue to proceed. For now, the story remains a side issue but could grow in importance if the CFO is physically transported to U.S. and talks hurl towards their deadline in March.
On the eco front, the only data of note was the U.K. labor reports which came in generally in line with wages rising 3.3% vs. 3.3% eyed. The cable saw some positive traction post the news running through the 1.2900 figure to a high of 1,2920. The focus with cable remains squarely on the Brexit negotiations which appear to have been so badly botched by PM May that a new consensus is starting to form around the idea of a second referendum. The market is now completely discounting the prospect of a hard Brexit, though the political risk still remains in play and volatility is sure to ratchet higher if no clear path is visible to the market.
In North America today the focus will be on Existing Home sales, which have slumped over the past six months with today’s forecast is for 5.25M run rate versus 5.32M the period prior. Existing Homes is considered to be one of the leading indicators for a possible slowdown in the U.S. economy and if today’s data once again surprises to the downside it could trigger further risk-off flows as the day proceeds on fears that we may be entering a global synchronized slowdown. USD/JPY recovered a good part of its flash crash decline but has failed to recoup the 110 figure and if today’s data shows further deterioration the pair could tumble towards 109.00 as the day proceeds.