FX News Today
European Fixed Income Outlook: Markets in Europe re-open after the Christmas holiday weekend, but trading will by quiet. Wall Street closed fractionally lower on Tuesday, while long Treasury yields declined. In Europe, peripheral yields are likely to remain volatile as the ECB halted purchases over the holiday period, with thin market conditions apt to amplify movements. The economic calendar is quiet today. Preliminary inflation data for December is due out of both Germany and Spain on Friday, where we expect headline rates falling back again after the spike in November, which was mainly driven by base effects from energy prices. An abatement in inflation would back Draghi’s commitment to ongoing asset purchases, although with the output gap closing faster than anticipated, the ECB’s guidance should gradually change over the coming months, with the focus shifting from net purchases to maintaining the stock of assets, and eventually rates.
FX Update: The dollar has been trading with a soft tilt, with USDJPY edging out a four-session low at 113.12, EURUSD a four-session high at 1.1884, and USDCAD making three-week low and AUDUSD a two-month high, at 0.7750. This has come despite robust producer sentient data yesterday out of the U.S., along with the expected fiscal stimulus to come after the passing of the U.S. tax overhaul bill last week. London and other key interbank centres reopen today, though staffing levels and client activity will remain very low until next Tuesday. The calendar is very lightly in Europe and North America today, highlighted by UK mortgage data, an Italian bond sale, and U.S. consumer confidence data.
U.S. Reports: revealed another two robust producer sentiment readings for December that provide a prelude to a renewed sentiment updraft into 2018 with the new tax law, alongside a 0.2% October rise in the S&P Case Shiller home price index that bucked seasonal price restraint to leave a rise in the y/y gain to 6.4% from 6.2%. For the Dallas Fed, we saw a rise to an 11-year high of 29.7, from 19.4 in November and a prior 11-year high of 27.6 in October. For the Richmond Fed, we saw a drop-back to a 20 reading in December that marks the second strongest figure since December of 2010, from an all-time high of 30.0 in November, with an employment index pop to a new cycle-high. Both measures have shown little moderation from the big hurricane rebuilding lift starting in September, and the ISM-adjusted level of all the major sentiment indexes is rising back to 58 from 57 in November.
Charts of the Day
Main Macro Events Today
- Swiss ZEW Survey – Credit Swiss Economic Expectations will be released at 09:00 GMT
- US Pending Home Sales- The NAR pending home sales index is expected to ease to -0.5% in November from 3.5%.
- Japanese Retail Trade – November retail sales are seen bouncing to -0.6% from -0.7% for large retailers, and to 1.2% y/y from -0.2% overall.
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