The Japanese currency stole the limelight across the fx space in Asia this Thursday, despite the FOMC minutes-induced rally in Treasury yields, as risk-aversion emerged the key theme after the Asian equities joined the Wall Street sell-off. Rising expectations of a faster pace of the US tightening pushed the Treasury yields higher across the curve, in turn, weighed down on the alternative risk assets such as the equities. On the other hand, the Antipodeans, the EUR, and GBP traded in the red zone, as the US dollar held steady near 8-day tops of 90.08 versus its main competitors.
Among the commodities, gold prices dropped nearly -0.50% to $ 1325 levels while WTI was down 1%, as a broadly stronger dollar offset a report of a drop in the US crude stockpiles.
Main topics in Asia
UK Treasury Select Committee to launch cryptocurrency inquiry - Reuters
The UK's Treasury Select Committee, a bipartisan group of MPs from both sides of the line, is set to begin an official inquiry into cryptocurrencies and blockchain technology, according to a UK statement.
UK Cabinet angered by Theresa May's Brexit strategy paper - The Telegraph
As reported by The Telegraph, Theresa May's official strategy document found no friends in the UK Parliament.
German finance ministry expects growth swing to continue - Reuters
The German Finance Ministry's latest monthly report shows incredibly bullish expectations; details via Reuters.
Nikkei tumbles back below 22,000.00 as markets pull back
Japan's leading Nikkei 225 Index is sinking as risk aversion takes hold of the Asian markets, testing 21,640.00 as of writing.
Fed's Kashkari - Fed should be patient, allow inflation to build
Fed's Kashakri's comments are crossing the wires via Reuters …
Fed's Kashkari - Aggressive rate hikes could push economy into recession
Fed's Kashkari is worried that aggressive interest rate hikes could invert the yield curve and tip economy into recession.
Key Focus ahead
Markets gear up for another eventful calendar ahead, with the speech by the FOMC member Quarles, eyed for further insights on the Fed’s rate hike prospects for this year. In the European session, the German Ifo business surveys and UK Q4 GDP second revision will offer fresh trading impetus to the EUR, GBP traders, as they await the ECB monetary policy meeting minutes for fresh cues on the bank’s tapering plans.
The NA session is also expected to remain busy, as the Canadian retail sales will be reported at 1330GMT. At the same, the US will report its weekly unemployment claims data, following which the Fed officials Dudley and Bostic will deliver their respective speeches. Also, of interest, will be the US EIA crude inventories report that is expected to provide fresh direction on oil prices.
EUR/USD - Down 2% from recent highs, but long-run bull outlook intact
The EUR/USD pair fell to 1.2265 in Asia - the lowest level since Feb. 12, tracking the post-Fed minutes rise in the treasury yields and the resulting widening of the US-DE two-year bond spread in the USD positive manner.
GBP/USD drooping under the weight of Brexit fears ahead of UK GDP figures
The UK will see GDP figures at 09:30 today, with median forecasts anticipating figures to come in at 1.5% for the headline figure, unchanged from the previous reading.
UK Q4 GDP to be confirmed at 0.5% q/q - Barclays
The Barclays Research Team offer a sneak peak on what to expect from today’s UK Q4 GDP second estimate due on the cards at 0930GMT.
Key Events Ahead
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USD/JPY fades the dovish BoJ commentary-led uptick above 150.50
USD/JPY is reversing the bounce to near 150.70 in the Asian session on Thursday. The pair remains weighed down by rising bets for another BoJ rate hike this month, shrugging off the dovish comments from BoJ policymaker Nakamura and a modest recovery in the US Treasury bond yields.
Gold extends range play as focus shifts to US Nonfarm Payrolls
Gold's price continues with its narrow range struggle at around $2,650 early Thursday, stalling Federal Reserve Chairman Jerome Powell’s speech-led uptick. The focus now remains on the US Jobless Claims data due later in the day in the lead-up to the all-important Nonfarm Payrolls data.
Four out of G10
In most cases, the G10 central bank stories for December are starting to converge on a single outcome. Here is the state of play: Fed: My interpretation of Waller’s speech this week is that his prior probability for a December cut was around 75% before the data.
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