Asian FX Outlook: Sterling flies as Brexit deal nears, US NFP next big focus

Ivan Delgado Independent Analyst

Main topics

The Sterling is higher across the board following reports of an Irish deal as part of the Brexit negotiations.

UK PM May is finalizing details for a Brexit deal, according to the UK Telegraph. She is planned to travel to Brussels on Friday to sign the deal.

EU's Tusk is due to make a Brexit statement early on Friday. The headlines are likely to inject volatility in the Sterling.

Bitcoin remains on a rampage, breaking above the $15,000, with some exchanges trading at premiums as high as $20,000.

US NFP is the next big focus, with the wage component expected to see firm figures.

Worth keeping an eye on North Korea, as the last headlines indicate a ramp-up of the rhetoric, saying the US threats make war unavoidable.

China's trade balance during the Asian session, coupled with UK manufacturing production PMI are immediate data releases set to move the AUD and GBP respectively.

A look at FX majors

EUR/USD kept pushing lower, despite the decreasing volume from the last 3 days indicates USD strength with no substance behind/by default. The next directional bias will be subject to the results of the US NFP figures.

GBP/USD saw a bullish outside day, with a close just below 1.35. The price action communicates that long-side business is in full control. The pair will remain volatile on a Brexit headline-by-headline basis as well as on the release of the US NFP.

USD/JPY longs went on a stampede of buying frenzy to burst through the 50% fib retrac from the Nov decline as risk appetite returns. The close above 11300 is technically bullish, subject to the US NFP data ahead.

AUD/USD sellers continue in full control, with Thursday's close suggesting the risk is skewed towards further losses. The key support at 0.75 is holding up ahead of the US NFP.

What happened?

US w/e Initial Jobless Claims came at 236k vs 240k exp and 238k prev, with the 4-week average at 241.50k vs 242.25k prev.

Meanwhile, the w/e Continued Jobless Claims saw a print of 1.908 mln vs 1.908 mln exp and 1.957 mln prev (revised to1.960 mln).

Trump and Democrats face off over potential U.S. government shutdown.

Germany’s Social Democrats (SPD) on Thursday backed holding talks with Chancellor Angela Merkel, which raises the probabilities of a new coalition government.

Canada's Oct Building Permits MoM came at 3.5% vs 1.5% exp and 3.8% prev (revised to 4.9%).

Canada's Nov Ivey PMI came at 62.4 vs 63.5 prev, while the seasonally adjusted reading stood at 63.0 vs 63.8 prev.

Upcoming events

GMT	Event	Actual	Consensus	Previous
Thursday, Dec 07
09:00	SGD Foreign Reserves (MoM)	279.6B		276.0B
10:00	EUR Unemployment Rate (MoM)	20.5%		20.7% Revised from 20.6%
10:00	HUF Budget Balance	-220.8B		-181.9B
10:00	EUR Gross Domestic Product s.a. (QoQ)	0.6%	0.6%	0.6%
10:00	EUR Gross Domestic Product s.a. (YoY)	2.6%	2.5%	2.5%
n/a	EUR 10-y Bond Auction	0.36%		0.76%
n/a	GBP 30-y Bond Auction	1.81%		1.87%
n/a	EUR 5-y Bond Auction	0.290%		0.363%
n/a	EUR 10-y Obligaciones Auction	1.410%		1.536%
11:30	CLP Trade Balance	$512M	$670M	$583M
12:00	CLP Core Consumer Price Index (Inflation) (MoM)	-0.1%		0.5%
12:00	CLP Consumer Price Index (Inflation) (MoM)	0.1%		0.6%
12:30	USD Challenger Job Cuts (YoY)	35.038K		29.831K
13:00	PLN Central Bank FX Reserves	€95.8B		€95.0B
13:00	RUB Central Bank Reserves $	$430.6B		$430.2B
13:30	USD Fed's William Dudley speech
13:30	USD Initial Jobless Claims	236K	240K	238K
13:30	USD Continuing Jobless Claims	1.908M	1.908M	1.960M Revised from 1.957M
13:30	CAD Building Permits (MoM)	3.5%	1.5%	3.8%
14:00	MXN 12-Month Inflation	6.63%	6.60%	6.37%
14:00	MXN Headline Inflation	1.03%	1.01%	0.63%
14:00	MXN Core Inflation	0.34%	0.32%	0.25%
14:30	TRY Treasury Cash Balance	5.65B		-4.50B
15:00	CAD Ivey Purchasing Managers Index	62.4		63.5
15:00	CAD Ivey Purchasing Managers Index s.a	63.0	62.7	63.8
15:30	USD EIA Natural Gas Storage change	2B	-7B	-33B
16:00	EUR ECB President Draghi's Speech
17:00	BRL Interest Rate Decision	7.0%	7.0%	7.5%
20:00	USD Consumer Credit Change	$20.52B	$17.50B	$19.21B Revised from $20.83B
21:45	NZD Manufacturing sales	0.3%		1.0%
23:50	JPY Bank lending (YoY)		2.8%	2.8%
23:50	JPY Gross Domestic Product (QoQ)		0.4%	0.3%
23:50	JPY Gross Domestic Product Deflator (YoY)		0.1%	0.1%
23:50	JPY Gross Domestic Product Annualized		1.5%	1.4%
23:50	JPY Trade Balance - BOP Basis		¥418.1B	¥852.2B
23:50	JPY Current Account n.s.a.		¥1,720.5B	¥2,271.2B
Friday, Dec 08
24h	USD US Government Shutdown Limit
24h	EUR Immaculate Conception Day
24h	CLP Immaculate Conception
24h	COP Immaculate Conception
24h	EUR Immaculate Conception Day
24h	EUR Immaculate Conception
24h	ARS Immaculate Conception
00:00	JPY Labor Cash Earnings (YoY)		0.8%	0.9%
n/a	AUD HIA New Home Sales (MoM)			-6.1%
00:01	EUR Consumer Confidence			104.8
00:30	AUD Investment Lending for Homes			-6.2%
00:30	AUD Home Loans		-2.5%	-2.3%
02:00	CNY Exports (YoY) CNY			6.1%
02:00	CNY Imports (YoY) CNY			15.9%
02:00	CNY Trade Balance USD		$35.0B	$38.2B Revised from $38.2B
02:00	CNY Exports (YoY)		5.0%	6.9%
02:00	CNY Imports (YoY)		11.3%	17.2%
02:00	CNY Trade Balance CNY		231.0B	254.5B
n/a	CNY Foreign Exchange Reserves (MoM)		¥3.120T	¥3.109T
05:00	JPY Eco Watchers Survey: Outlook			54.9
05:00	JPY Eco Watchers Survey: Current		52.1	52.2
05:30	EUR Manufacturing Output (MoM)			1.4%
06:00	EUR Industrial Output (MoM)			4.7%
07:00	EUR Trade Balance s.a.		€21.8B	€21.8B
07:00	EUR Exports (MoM)		1.0%	-0.4%
07:00	EUR Current Account n.s.a.			€25.4B
07:00	EUR Imports (MoM)		1.1%	-1.0%
07:00	TRY Industrial Production (YoY)			10.4%
07:00	EUR Trade Balance			€-0.21B
07:00	HUF Core Consumer Price Index (YoY)			2.7%
07:00	HUF Trade Balance			€937M
07:00	HUF Consumer Price Index (YoY)			2.2%
n/a	CZK Unemployment Rate			3.6%
07:00	EUR Foreign Trade Balance			€450M
07:45	EUR Industrial Output (MoM)		-0.1%	0.6%
07:45	EUR Budget			€-76.3B
09:00	INR Cash Reserve Ratio		4%	4%
n/a	ISK Gross Domestic Product (QoQ)			-1.1%
n/a	ISK Gross Domestic Product (YoY)			3.4%
09:30	GBP Manufacturing Production (MoM)		0.1%	0.7%
09:30	GBP Industrial Production (MoM)		0.0%	0.7%
09:30	GBP Industrial Production (YoY)		3.5%	2.5%
09:30	GBP Manufacturing Production (YoY)		3.9%	2.7%
09:30	GBP Total Trade Balance			£-2.75B
09:30	GBP Goods Trade Balance		£-11.45B	£-11.25B
09:30	GBP Trade Balance; non-EU		£-3.30B	£-2.98B
10:00	EUR Consumer Price Index - Harmonized (YoY)			0.5%
10:00	EUR Consumer Price Index (YoY)			0.7%
11:30	INR Bank Loan Growth			8.6%
11:30	INR FX Reserves, USD			$400.74B
13:00	GBP NIESR GDP Estimate (3M)			0.5%
13:15	CAD Housing Starts s.a (YoY)		215.0K	222.8K
13:30	USD Average Hourly Earnings (MoM)		0.3%	0.0%
13:30	USD Labor Force Participation Rate			62.7%

Author

Ivan Delgado

Independent Analyst

Established in the Asian continent since 2009, Ivan studied a degree in Business at the University Pompeu Fabra (Barcelona), while also earning a postgraduate degree in Business Administration.

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