The U.S dollar ended overnight 0.90% weaker against its G10 counter pairs, weakened by dovish FOMC minutes. This morning dollar is mixed against the G10, and the Asian equity indices opened mixed but now in red. U.S futures fell 0.45% at the time of preparing.

Brent oil futures slipped 0.5% in Japan after a strong overnight rally. Besides Gold and Silver prices rose marginally in Australia and Japan.

Data review:
China official CPI readings fell in December, according to the government data.

  • China’s December CPI was 1.9% YoY, the lowest in six months, forecast 2.1% vs. 2.2%.
  • December PPI was 0.9% YoY, the lowest since September 2016, forecast 1.6%, vs. 2.7%

Source: NBS


In the day ahead, it is a quiet day regarding data releases. However, two events On the Europe and U.S sessions worth keeping an eye out for are ECB Dec 2018 meeting minutes at 12.30 GMT. On top of these, Powell speaks in Washington followed by FOMC members Bullard and Evans.

“The European Central Bank will release the minutes of its last meeting. As the US Fed nears the end of the tightening, the ECB has yet to get going. Nothing is likely to excite the markets in today’s release – change is not expected before the change in the ECB presidency.” Paul Donovan from UBS said.

  • Danske Bank said “In the ECB minutes, we will look for the discussion on the growth and inflation outlook – not least the comments on the decade-strong, wage-growth numbers. In detail, we will carefully watch for language potentially containing hints on the growth outlook and whether it might be changed at the 24 January meeting (to the ‘downside’ from ‘broadly balanced’).”

As the new year kicks off, the latest eurozone economic data reports revealed EZ economy is adopting further downside risk. We learned the same from BOC Jan policy report and FOMC December meeting minutes.

• In Dec 2018, Germany production in the industry was down by 1.9% from the previous month on a price according to provisional data of the Federal Statistical Office (Destatis). The revised figure shows a decrease of 0.8% (primary -0.5%) from October 2018.

Geopolitical developments take the central stage with ongoing US-China trade discussions and UK MPs to vote on Brexit deal next week (Jan 15). If the deal between EU-UK is passed in parliament, uncertainty will fade for the next few days at least, as we have just 78 days to go until the Brexit deadline.

  • Nomura said “The Brexit negotiations would continue as both sides have only agreed to an outline of intent in a future arrangement. The deal would lead to the UK leaving the EU on 29 March 2019 and entering a transition period, with further negotiations, while single market rules would continue to apply, but the UK would not be represented in the EU institutions”.
    We expect UK financial markets volatility likely to elevate next week and the uncertainty remains until markets get a clear forward picture for the Brexit.

Also Read: Market wrap


FX INSIGHT

GBPUSD: Capped against the descending TL.  Current range: 1.2815-1.2700. Above 1.2815 could rally to 1.2870/1.2900 while selling pressure remains until trades below 1.2815. Flipside below 1.2700 could retrace to 1.2615/1.2600 levels.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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