US dollar stable as Fed held rate unchanged

Market Brief

As expected the Federal Reserve left the target range for the federal fund rate unchanged at between 0.25% and 0.50%. However, it appears that the Fed was more cautious while discussing the risk to growth and the possible effects of the current market turmoil on the Fed’s thinking and more specifically, the path of tightening. In our opinion, the Fed wants to avoid to end up in the same position as last year when, after months of hawkish comments, it has had to increase rates to save its credibility in spite of mixed signals from the US economy. The US dollar remained stable amid the rate decision with EUR/USD trading range bound between 1.0860 and 1.0920. The March meeting will be much more decisive, just like the market’s expectations.

After cutting rates four times in 2015, the Reserve Bank of New Zealand decided to leave the official cash rate unchanged at 2.50%. According to the statement, the weak spot in inflation is temporary, “mainly due to falling oil price“ and healine CPI is expected to increase over 2016. On the growth side, the RBNZ maintained its optimistic view for the year ahead, writing that “growth is expected to increase in 2016 as a result of continued strong net immigration, tourism, a solid pipeline of construction activity, and the lift in business and consumer confidence”. NZD/USD dropped 1.40% amid the release of the statement as Governor Wheeler made clear that the monetary policy will continue to be accommodative, adding that further monetary easing may be required. The bias is clearly on the easing side as the Central Bank wants to maintain the weakness of the New Zealand dollar to help curb disinflationary pressures and boost exports. We remain bearish on the Kiwi with 0.6240 as next target.

In Japan, retail sales disappointed substantially in December, contracting 1.1%y/y while economists were expecting an increase of 0.2%: previous month figure was revised lower to -1.1% from -1.0%. USD/JPY gained 0.40% amid the headlines, rising to 118.90 in Tokyo. Overall, we expect the pair to recover early 2016 losses as the risk-off sentiment fade away and the market focus again the country’s lacklustre fundamentals.

In the equity market, returns are mixed in Asia as the panic move come to an end. The Japanese Nikkei seemed unable to break to the downside the 17,000 level and is trading slightly above, waiting for the buyers to wake up. The index lost 0.71% during the session while the Topix index was down 0.61%. In mainland China indices continued to move south with the Shanghai and Shenzhen down 2.92% and 4.18%. In Europe, futures are also moving lower, however sellers seem to be losing faith in the sustainability of the sell-off.

Today traders will be watching unemployment rate from Denmark; retail sales and unemployment rate from Spain and Sweden; 4Q GDP from the UK; COPOM minutes, unemployment rate, central government budget balance and inflation from Brazil; CPI from Germany; initial jobless claims, durable goods orders and pending home sales from the US; interest rate decision from South Africa (a rate hike is expected).


Global Indexes	Current Level	% Change
Nikkei 225 Index	17041.45	-0.71
Hang Seng Index	19148.52	0.5
Shanghai Index	2655.661	-2.92
FTSE futures	5925	0.19
DAX futures	9813.5	-0.44
SMI Futures	8198	-0.05
S&P future	1884.3	0.49


Global Indexes	Current Level	% Change
Gold	1117.63	-0.65
Silver	14.42	-0.44
VIX	23.11	2.71
Crude wti	32.26	-0.12
USD Index	99.04	0.14


Today's Calendar	Estimates	Previous	Country/GMT
SP Dec Retail Sales YoY	-	4,20%	EUR/08:00
SP Dec Retail Sales SA YoY	3,00%	3,30%	EUR/08:00
SP 4Q Unemployment Rate	21,20%	21,18%	EUR/08:00
RU Bloomberg Jan. Russia Economic Survey (Table)	-	-	RUB/08:00
SW Dec Unemployment Rate	6,40%	6,20%	SEK/08:30
SW Dec Unemployment Rate Trend	-	7,00%	SEK/08:30
SW Dec Unemployment Rate SA	6,90%	6,80%	SEK/08:30
SW Dec Trade Balance	0.0b	-5.2b	SEK/08:30
SW Dec Retail Sales MoM	0,00%	0,40%	SEK/08:30
SW Dec Retail Sales NSA YoY	4,60%	5,20%	SEK/08:30
NO 4Q Industrial Confidence	-6	-8	NOK/09:00
GE Jan CPI Brandenburg MoM	-	0,00%	EUR/09:00
GE Jan CPI Brandenburg YoY	-	-0,10%	EUR/09:00
GE Jan CPI Hesse MoM	-	-0,10%	EUR/09:00
GE Jan CPI Hesse YoY	-	0,30%	EUR/09:00
GE Jan CPI Bavaria MoM	-	-0,10%	EUR/09:00
GE Jan CPI Bavaria YoY	-	0,50%	EUR/09:00
TU Dec Foreign Tourist Arrivals YoY	-	-0,50%	TRY/09:00
IT Dec Hourly Wages YoY	-	1,30%	EUR/09:00
IT Dec Hourly Wages MoM	-	0,20%	EUR/09:00
GE Jan CPI North Rhine Westphalia MoM	-	-0,10%	EUR/09:30
GE Jan CPI North Rhine Westphalia YoY	-	0,40%	EUR/09:30
SA Dec PPI YoY	4,90%	4,30%	ZAR/09:30
SA Dec PPI MoM	0,30%	0,10%	ZAR/09:30
UK 4Q A GDP QoQ	0,50%	0,40%	GBP/09:30
UK 4Q A GDP YoY	1,90%	2,10%	GBP/09:30
UK Nov Index of Services MoM	0,20%	0,10%	GBP/09:30
UK Nov Index of Services 3M/3M	0,60%	0,50%	GBP/09:30
EC Jan Economic Confidence	106,4	106,8	EUR/10:00
EC Jan Business Climate Indicator	0,4	0,41	EUR/10:00
EC Jan Industrial Confidence	-2,5	-2	EUR/10:00
EC Jan Services Confidence	12,9	13,1	EUR/10:00
EC Jan F Consumer Confidence	-6,3	-6,3	EUR/10:00
BZ Jan FGV Inflation IGPM MoM	0,99%	0,49%	BRL/10:00
BZ Jan FGV Inflation IGPM YoY	10,81%	10,54%	BRL/10:00
BZ COPOM Monetary Policy Meeting Minutes	-	-	BRL/10:30
BZ Brazil's Central Bank Publishes Minutes From January Meeting	-	-	BRL/10:30
BZ Dec Unemployment Rate	7,30%	7,50%	BRL/11:00
UK Jan CBI Reported Sales	18	19	GBP/11:00
BZ Dec Central Govt Budget Balance	-60.0b	-21.3b	BRL/12:30
SP Bank of Portugal's Costa Speaks in Madrid	-	-	EUR/13:00
GE Jan P CPI MoM	-0,80%	-0,10%	EUR/13:00
GE Jan P CPI YoY	0,40%	0,30%	EUR/13:00
GE Jan P CPI EU Harmonized MoM	-1,00%	0,00%	EUR/13:00
GE Jan P CPI EU Harmonized YoY	0,40%	0,20%	EUR/13:00
RU janv..22 Gold and Forex Reserve	-	368.3b	RUB/13:00
SP Bank of Portugal Governor Speaks in Madrid	-	-	EUR/13:00
US janv..23 Initial Jobless Claims	281k	293k	USD/13:30
US janv..16 Continuing Claims	2218k	2208k	USD/13:30
US Dec P Durable Goods Orders	-0,70%	0,00%	USD/13:30
US Dec P Durables Ex Transportation	-0,10%	0,00%	USD/13:30
US Dec P Cap Goods Orders Nondef Ex Air	-0,20%	-0,30%	USD/13:30
US Dec P Cap Goods Ship Nondef Ex Air	0,80%	-0,60%	USD/13:30
EC ECB SSM Board Member Coene Speaks in Brussels	-	-	EUR/14:30
US janv..24 Bloomberg Consumer Comfort	-	44	USD/14:45
US Dec Pending Home Sales MoM	0,90%	-0,90%	USD/15:00
US Dec Pending Home Sales NSA YoY	4,80%	5,10%	USD/15:00
US Jan Kansas City Fed Manf. Activity	-10	-9	USD/16:00
EC ECB Governing Council Member Jens Weidmann Speaks in Bonn	-	-	EUR/18:00
NZ Dec Building Permits MoM	-	1,80%	NZD/21:45
SA janv..28 SARB Announce Interest Rate	6,75%	6,25%	ZAR/20:00
CH Dec Leading Index	-	98,11	CNY/23:00
IN Dec Eight Infrastructure Industries	-	-1,30%	INR/23:00

Currency Tech

EURUSD
R 2: 1.1387
R 1: 1.1095
CURRENT: 1.0879
S 1: 1.0458
S 2: 1.0000

GBPUSD
R 2: 1.5242
R 1: 1.4969
CURRENT: 1.4264
S 1: 1.3657
S 2: 1.3503

USDJPY
R 2: 125.86
R 1: 123.76
CURRENT: 118.87
S 1: 115.57
S 2: 105.23

USDCHF
R 2: 1.0676
R 1: 1.0328
CURRENT: 1.0170
S 1: 0.9786
S 2: 0.9476

S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

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