- Forex on Friday was contending with a risk on profile in the financial and commodities markets as investors latched onto headlines around US-China trade talks that were being reported as mostly encouraging.
However, what was evident was the weakness in the greenback and the value of gold. Gold rallied despite the risk on mood and USD/JPY ended off its London session highs. There is growing sentiment that the Fed will not be in a position to hike in 2019 and the futures markets are still pricing in little chance of it as well - In fact, they are now assigning a 10% chance to a December cut. SF Fed’s Daly hit the wires on Friday and explained to the WSJ that if the economy evolves as she expects, with 2% GDP growth and 1.9% inflation, then the case for another rate rise “isn’t there.” Despite that, due to the stock market rally, the US 10yr treasury yield climbed 1bp to 2.66%, while 2yr yields rose from 2.49% to 2.51%.
Currency action:
Analysts at Westpac offered a summary of the action in the G10s on Friday as follows:
"EUR/USD dipped as low as 1.1234 after ECB’s Coeure said the bank was discussing a new targeted long term refinancing operation. The euro recovered in NY trade though and starts the week around 1.1300. GBP/USD rallied in NY and starts the week a little firmer, up about 1% overall to 1.2925. The UK Jan retail sales report was much stronger than expected, with volumes rebounding 1.2%mth from -1% in Dec, up 4.1%yr (ex-fuel).
USD/JPY ranged between 110.30 and 110.65. AUD/USD benefited from the positive risk environment, beginning its rally in the London morning from under 0.7090, extending to 0.7149 late NY and starting the week around 0.7135. NZD rose from 0.6820 to 0.6860. AUD/NZD rose from lows around 1.0370 to 1.0410."
Key events in the US session:
Key events ahead in Asia this week:
While there is nothing to look at today, (US President's Day holiday/quiet markets expected), the focus should be on the general markets conditions, a time to reflect/plan ahead if you like, before we have the RBA minutes on Tuesday and the very important labour market data with Q4 wages on Wed and Jan employment on Thursday.
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