Danske Research Team
Danske Bank A/S
Market Movers
The calendar of economic data releases is relatively thin today.
Euro area industrial production for November is released today and we look for a small decline in line with the German figure.
In the US a large number of Fed members are speaking this week. The time after the FOMC meeting in December has been quiet due to Christmas and the New Year, so not much information from the Fed members has come out yet. Remember, as the calendar now says 2016, voting rights have changed. Today we will hear more from the dovish camp of the Fed board as both Rosengren (voter, dovish) and Evans (voter, dovish) will give speeches on the economic outlook. The Fed Beige Book is due for release tonight.
In Canada GDP and retail sales figures are due for release.
Selected Market News
Market focus remains on developments in China and commodity markets.
This morning trade figures out of China surprised to the upside as the December trade balance rose (in both USD and CNY terms) against market expectations of a drop. In USD-terms exports dropped by only 1.4% y/y (consensus of -8.0%) and actually rose 2.3% when measured in local currency. Imports also surprised by dropping less than expected. Overall the release offers support to the Chinese currency at a time where Chinese authority intervention is fighting off currency depreciation (see next paragraph).
Over the last days the People’s Bank of China has drawn a line in the sand by stepping up efforts significantly to halt the depreciation of the CNY and CNH versus the USD. Today USD/CNY fixed at a stable level for the fourth consecutive day and the CNY-CNH spread remains closed. Also China’s FX regulator (SAFE) is said to have instructed some banks operating on the mainland to limit yuan outflows and to limit CNH holdings.
In the short term a halt in the CNY and CNH decline will be supportive for risk sentiment. This morning most Asian stock indices are trading in green territory, as illustrated by the MSCI Asia Pacific index, halting a seven-day period of drops by rallying the most in four weeks.
While WTI-oil yesterday temporarily breached the psychological barrier of USD30/bl, the oil price has since stabilised on the back of the above. The global benchmark Brent crude trades around 31 USD/bl this morning.
In Japan, Takatoshi Ito, a former colleague of Bank of Japan governor Kuroda, stated that the Japanese economy has breathing space to allow a stronger JPY but that it would be a problem if USD/JPY ‘goes to 115 from 117 and heads to 110’, which would likely prompt policy action.
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