Sterling rises as U.K. P.M. adjusts ministerial cabinet, euro falls versus majority of peers, dollar index rises.
The euro fell versus the majority of its peers during Monday’s sessions, analysts at leading banks suggested that the reason for the fall was two fold, firstly; lack lustre inflation data for the Eurozone published on Friday, suggests that the ECB won’t aggressively taper the asset purchase programme in 2018. Secondly; profit taking, as many traders viewed above 1.20 as too high a level for the currency pair. These reasons appear to be plausible, given that the economic news relating to the Eurozone published on Monday, was highly encouraging.
Germany’s factory orders rose to 8.7% annual growth up to November, retail sales for the E.Z. rose by 1.5% MoM in November and by 2.8% YoY. Whilst a cluster of December sentiment and confidence readings for the single bloc region, came in generally ahead of forecasts; economic confidence coming in at 116 and industrial confidence coming in at 9.1. As previously mentioned, these impressive figures failed to deliver support to the euro; both EUR/GBP and EUR/JPY falling through S3, with EUR/USD closing out the day down circa 0.8%, after falling back through the critical 1.200 handle.
The U.K. pound eventually increased in value versus the majority of its main peers, after beginning the early part of the trading day falling. The U.K. prime minister May had telegraphed the news over the weekend, that she would be replacing and shuffling around certain ministers in her cabinet throughout Monday. This news and the rumours circulating that she would create a minister for no deal (Brexit), sparked a short sell off in the U.K. pound. However, as the day progressed the rumours regarding the no deal appointment failed to materialise and the pound recovered, as the changes in personnel and promotions lacked any fireworks, or surprises. GPB/USD closed out the day up circa 0.1% and up circa 0.3% versus the Swiss franc.
U.S. equities traded in a tight range, with the DJIA closing down marginally, the SPX up 0.17% and the NASDAQ up 0.24%. Investors may have been scrambling for a reason to push values higher, without any significant economic calendar releases being published on the day, in order to justify further increases. The dollar spot index rose by circa 0.29% to a one week high, perhaps indicating the beginning of break down of the trend, which has been in existence over the past three weeks. Gold refused to give up the majority of gains built up over recent weeks, closing out the day up approx. 0.1% at 1,320, just above the daily PP, after reaching a daily low of 1315.
USD/JPY whipsawed in a tight range with a bullish bias, in the morning European session the major pair rose to R1 up circa 0.3% on the day, before giving up the gains, to close out flat on the day at 113.08, resting on the daily PP. USD/CHF also traded in a tight bullish range, breaching R1, then giving up the gains to retrace back to the daily PP, before reclaiming the first level of resistance, closing out up circa 0.3% on the day at 0.977. USD/CAD also traded in a tight range, closing the day out close to flat at 1.242, resting on the daily PP.
GBP/USD whipsawed through changing sentiment and a wide range of circa 0.7% on the day, as both bearish and bullish conditions were experienced. Falling through S1 down 0.4%, before recovering to then breach the daily PP closing out up circa 0.1% at 1.356. Several sterling cross currency pairs followed similar patterns; failing in the morning European session to recover as the trading day progressed. GBP/CHF threatened to breach S1, before recovering to rise through R1 to end the day up circa 0.3% at 1.325.
EUR/GBP began to fall early morning and continued to trade in a bearish direction and daily trend as it systematically took out the three levels of support, closing out the day below S3, down circa 1% at 0.882. EUR/USD closed the day down circa 0.8% breaking through the critical 1.200 handle at 1.196, after breaching the second level of support. EUR/CHF experienced similar price action behaviour and ended the day down circa 0.8% at 1.169. The Swiss franc appeared to attract bids throughout the day versus certain peers, however, its safe haven appeal does not appear to have been restored as USA equity markets and other risk on assets, maintained their recent gains.
XAU/USD printed a low of 1,315, whilst trading in a narrow range of circa 7 points, falling through S1, before reclaiming the 1,320 level rising to 1,322, to end the day just above the daily pivot point up circa 0.1% on the day at 1,320. Price is significantly above the 100 DMA sited at 1289 and the 200 DMA, positioned at 1272.
EQUITY INDICES SNAPSHOT FOR JANUARY 8th.
- DJIA closed down 0.05%.
- SPX closed up 0.17%.
- FTSE 100 closed down 0.36%.
- CAC closed up 0.30%.
- DAX closed up 0.36%.
KEY ECONOMIC CALENDAR EVENTS FOR JANUARY 9th.
- CHF. Unemployment Rate (DEC).
- EUR. German Industrial Production n.s.a. and w.d.a. (YoY) (NOV).
- EUR. German Trade Balance (NOV).
- EUR. Euro-Zone Unemployment Rate (NOV).
- USD. JOLTS Job Openings (NOV).
« Investors will monitor the Eurozone sentiment figures, Swiss CPI and Germany’s factory orders, for reasons to bid up the euro and European equity markets. U.S. equity markets reach record highs, U.S. dollar continues its recent recovery, yen rises due to the BOJ reduction in bond purchases. »