Forex Today: Yuan soars, Yen drops on US-China goodwill gestures; US CPI next on tap


The risk-on sentiment extended into Asia this Tuesday after the US Treasury retracted its decision in August to designate China as a currency manipulator. Further, an imminent US-China phase one trade deal signing on Wednesday amid signs of goodwill gestures for both sides buoyed the market mood.

The Asian equity markets reached seven-month highs amid risk-on trades at the expense of the safe-havens such as gold and the Japanese yen. The anti-risk yen fell to eight-month lows of 110.21 vs. its American rival in early trades. USD/JPY eased-off highs but traded above the 110 handle towards Asia closing.

The Antipodeans traded weaker despite the surge in the Chinese yuan and solid Trade data from China, as broad-based US dollar rebound combined with the negative impact of the Australian bushfire crisis weighed on the prices. The Aussie bounced-off 0.6885 lows and battled the 0.69 handle while the Kiwi posted small losses on the 0.6600 level. Gold-price weakness and depressed oil prices also could be also behind the negative tone seen in the commodity-currencies. The Chinese yuan was the top gainer, with USD/CNY downed to five-month lows of 6.8669.

Among the European currencies, both EUR/USD and the cable consolidated the recovery gains heading into the key US data release due later on Tuesday.

Main Topics in Asia

NZ: Business Opinion improved in Q4 – ANZ

US trade representative Lighthizer: Finished with translation of phase one China trade agreement - Fox

US Sec of State Pompeo: US is 'increasingly at risk from China's actions'

China to buy more US energy, manufactured goods in trade deal – Politico

US Treasury adds Swiss Franc back to its currency watch list - Bloomberg

USTR: US, Japan, EU to meet on China ahead of Wednesday trade deal signing - Reuters

Japan’s Nishimura: Consumer sentiment picking up but it remains at low level

China’s Trade data (CNY): Imports and exports jump sharply in December

China Customs Vice Minister Zou: China's trade growth will remain steady in 2020

China’s Dec Trade data (USD): Surplus misses estimates despite a big beat on Exports and Imports

Ex-Fed Chair Yellen: Phase one trade deal doesn't remove “more troublesome” risk of conflict over emerging technologies

China Customs: China’s crude oil imports off record highs in Dec, 2019 imports rise 9.5%

Key Focus Ahead       

With the US-China trade deal optimism-led risk-on trading likely to continue into Europe, markets await the speech by the European Central Bank (ECB) Governing Council member Merch’s speech, due at 0830 GMT, for some fresh incentives.

The EUR calendar today remains absolutely data-dry and therefore, the attention turns towards the US Consumer Price Index (CPI) report due to be published at 1330 GMT for fresh dollar trades. The US CPI for Dec is seen rising 2.3% YoY vs. +2.1% last while the core figures are seen steady at +2.3% YoY.  

Today’s EUR macro calendar sees the release of the second-liner   Wholesale Price Index (WPI) data for December, due at 0700 GMT. Next of note remains the UK data dump dropping in at 0930 GMT. The UK data includes the monthly GDP growth figures, trade balance, industrial and manufacturing production data. The data will be closely watched after several Bank of England (BOE) policymakers recently noted that the central bank is open to rate cuts as the next policy move.

Apart from the US data, Fed official Williams speech, the US Monthly Budget Statement and American Petroleum Institute US Weekly Crude Oil Stock data will garner some attention.

EUR/USD: Bounce stalls near 1.1140, eyes US inflation data

EUR/USD is struggling to post sustainable gains above 1.1140. An above-forecast China data failed to put a bid under the EUR in Asia. The US dollar may run into offers on weak US CPI. 

GBP/USD: Recovery remains capped just ahead of 1.3000

GBP/USD consolidates in a tight range just below the 1.30 handle, having failed several attempts to extend the recovery above the last so far this Tuesday. Technical set up remains bearish ahead of US CPI data.

US Consumer Price Index December Preview: The inflation sideshow

Monthly CPI core and headline rates expected to be stable. Annual inflation predicted to rise, core to be unchanged. Fed policy is not, rhetoric aside, dependent on inflation.

Trump and China to Sign Trade War Ceasefire on Wednesday

On Wednesday, the US and China will sign a compromise deal that will calm but not end a two-year trade war.

GMT
Event
Vol.
Actual
Consensus
Previous
Sunday, Jan 12
24h
 
 
Tuesday, Jan 14
06:30
 
2.15%
0.58%
08:30
 
 
11:00
 
103.1
104.7
13:30
 
0.2%
0.2%
13:30
 
257.162
257.208
13:30
 
2.3%
2.1%
13:30
 
2.3%
2.3%
13:30
 
0.3%
0.3%
13:30
 
266.119
265.620
13:55
 
 
7.2%
13:55
 
 
-2.6%
14:00
 
 
n/a
 
57.3
57.0
19:00
 
$-15B
$-209B
n/a
 
 
1.4%
21:30
 
 
-5.945M
21:45
 
0.0%
-0.7%
23:50
 
2.9%
2.8%
Wednesday, Jan 15
00:04
 
$-0.13B
$-1.33B
00:04
 
-1.18%
-5.67%
00:04
 
-13.32%
-9.24%
00:30
 
 
06:00
 
 
-37.9%
08:40
 
 
09:00
 
0.6%
1.5%

 

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