Prices fell across many asset classes last week; USD outperform

The disappointing UK and Chinese economic data, Weak EA PMI surveys, Dovish ECB are encouraging us to re-think about global growth rate. Besides, US retail sales were printed better than expected. On top of these, Brexit news accelerated the GBP volatility again last week.

Latest EZ PMI surveys suggest the latest flash PMI survey data indicate that growth of business activity in the euro area slowed to the weakest for over four years in December, according to the IHS Markit.

Currencies: Winners and losers last week

The dollar index (KTM symbol: USDX) breakthrough the earlier double top but failed to close above; but U.S 10Yr Treasury Yields fell back to 2.89 vs. 2.91 Thursday’s closing.
Overall, last week the dollar index closed higher in the Volatile week. Besides, equity indices fell, and Bonds rallied as Global growth fear multiples.

The NOK was the biggest loser in the G10 basket, with 1.7% against the USD, followed by GBP 1.30%, DKK by 1.00%, CHF and NZD by 0.90% each, JPY by 0.7%, CAD and SEK by 0.5% each and the AUD by 0.40% respectively.

Turning to EM currencies, South African Rand fell 1.70% and Turkish Lira down by 1.35% respectively.

Commodities:

The strong dollar always enjoys the inverse co-relation on commodities, Gold down 0.90$, Platinum down 0.80% and Silver down by 0.30% respectively. However, Palladium up 0.80%.

The Ferrari without the engines has been trading down since mid-Dec 2017. On Friday the Bitcoin closed below 3200$ mark, the lowest level since Sep 2017.

Weekly preview:

Data-packed week; Brexit chaos and the Fed meeting should dominate the headlines.

  • CPI for US and UK
  • GDP for NZ and US and Aussie labor force data
  • Fed, BOJ and BOE Interest rate.

FOMC preview:

  • Market participants are waiting for Fed’s tone and updated economic projections; besides the subject of a rate hike is already priced in. December rate hike would bring the target range of 2.25-2.50%. In case of a dovish hike, we could see a quick rally in G10 &EM currencies and commodities. However, the hawkish surprise could eventually push the dollar above 100.00 marks. In this case, we lean to further bullish on USDCHF than USDJPY.

USDX (weekly chart) =USDCHF and USDDKK for us. Based on this, we continue to see board upside for USDCHF and stay long in every dip.

  • Turning to the Bank of England’s meeting, we expect the no change. But given the risk associated around the globe and Brexit choas, our focus remains on the bank’s outlook on the economy.
  • The Bank of Japan is not expected to change in this week’s meeting. The Bank’s price stability target is to achieve the inflation rate of 2 percent, the current rate is at around 1%.
  • Australia Nov labor force data preview: The expected bounce in employment appeared in the October Labour Force Survey with a 32.8k rise. The market median was for 20k, according to Westpac.
  • NZ Q3 GDP: We expect growth to drop back to a more modest 0.5% in the September quarter as some of those one-offs are unwound, according to Westpac. The Bank’s price stability target is to achieve the inflation rate of 2 percent, the current rate is at around 1%.
  • In euro we are particularly focusing on EZ final CPI estimate for November (Mon, 17).Moody’s Analytics said, “We expect it to conform to expectations and show that inflation pressures in the currency area eased sharply at the middle of the fourth quarter, to 2% y/y, from 2.2% previously.”

Chart of the week: USDCHF

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