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European Fixed Income Outlook: The global improvement in stock markets continued in Asia overnight, led by Japan where the Nikkei rallied more than 3% in catch up trade, after the long holiday and as a weaker Yen underpinned exporters. U.S. benchmarks hit record highs yesterday after the Fed minutes showed ongoing backing for a “gradual approach” to raising rates and UK100 and U.S. futures are also moving higher, suggesting further gains. Treasury yields are higher, as are long yields in Japan and China and after yields headed south in Europe yesterday, the strong momentum on equity markets and a weaker USD could see European yields moving up from Wednesday’s lows. The local calendar has the final readings of Eurozone services PMIs, as well as the U.K. services PMI, which will be in particular focus after manufacturing and construction readings missed expectations.

FX Action: USDJPY has given back of half of its post-FOMC minutes gains in declining under 112.50. A peak was logged at 112.77 before Japanese corporate selling after the Tokyo fixing put a cap on the pairing, which yesterday lifted from around 112.30 after the minutes showed Fed members contemplating that the tax cut could boost consumption and capex. In Japan today, the final December manufacturing PMI was revised to 54.0 from the flash outcome of 54.2, while BoJ Governor Kuroda (who will be stepping down this year) said that the economy was showing steady growth. Geopolitical concerns are in the mix, particularly concerns that North Korea will conduct another provocative ICBM text, a backdrop that has seen markets build up a premium in the yen.

Charts of the Day


Main Macro Events Today        


  • Eurozone Service PMI
  • UK Services PMI – The services PMI expected to rebound a portion of November’s unexpected decline in lifting to a 54.0 headline from 53.8.  Monthly lending and money supply data are also up, where consumer and business lending will be of most interest.
  • US ADP & Unemployment Claims – The ADP private employment survey for December  is forecast rising 210k following the 190k increase in November, while unemployment claims are seen falling to 240K from 245K last week.
  • US Crude Oil Inventories

Support and Resistance Levels


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Andria Pichidi

Market Analyst

HotForex

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