It’s Risk on, Dollar Off as the Markets Consider the FED’s 2019 Rate Path

Risk appetite delivers early moves across the riskier asset classes. With a light economic calendar, vehicle sales out of China will be of interest.
Bob Mason
FX currencies

Earlier in the Day:

Economic data released through the Asian session this morning was limited to December machinery order numbers and 1st quarter forecasts out of Japan.

For the Japanese Yen,

According to figures released by the Cabinet Office,

Core machinery orders fell by 0.1% in January, month-on-month, which was better than a forecasted 1.1% decline. In November, orders had stagnated. Year-on-year, core machinery orders rose by 0.9%, falling well short of a forecasted 4.8% increase. In November, orders had risen by just 0.8%.

  • For the 4th quarter, core machinery orders slid by 4.2%, quarter-on-quarter.
  • Forecast for the 1st quarter of this year is for core machinery orders to fall by a further 1.8%.
  • Machinery orders from overseas fell by 21.9% in December, month-on-month, whilst rising by 12.1% in the 4th quarter of last year.
  • Orders for the 1st quarter of this year are forecasted to slide by 17.1%, reflecting the effects of weaker global growth and the ongoing U.S – China trade war.

Upon release of the figures, the Japanese Yen moved from ¥110.536 to ¥110.521, against the Dollar. At the time of writing, the Yen stood at ¥110.50, down 0.03% for the session.

Out of China,

Vehicle sales will give the likes of the DAX a move and also give the markets some further insight into the direction of the Chinese economy. Sales figures are due out later this morning.

Elsewhere,

The Kiwi Dollar stood at $0.6887 at the time of writing, a gain of 0.28% for the morning. The Aussie Dollar was also in positive territory ahead of the RBA meeting minutes due out tomorrow. Rising by 0.17%, the Aussie Dollar stood at $0.7153.

In the equity markets, direction came from positive updates from trade talks, with an anticipated extension to the 1st March deadline for tariffs supporting risk appetite early on.

At the time of writing, the Nikkei was up 1.87%, in spite of the disappointing machinery order figures, with the ASX200 up 0.33%.

Leading the way through the early part of the day was the CSI300, which was up by 2.11%, while the Hang Seng trailed with a 1.51% gain early on.

The Day Ahead:

For the EUR

There are no material stats scheduled for release through the day. The EUR will be in the hands of market risk sentiment. With the Spanish government calling for snap elections in April and economic woes troubling the markets, new questions have arisen over the fiscal policies of both France and Italy.

Both Italy and France have budget deficits that are forecasted based on overly optimistic growth forecasts. With the EU cutting Italy’s growth forecasts and France’s existing forecasts sitting ahead of Germany, the EU may be forced to deliver cuts to French growth forecasts should 1st quarter economic indicators fail to support the numbers.

Expect plenty of rumblings over the respective budget deficits of both France and Italy and the likely impact of sizeable downward revisions to growth projections for this year.

Outside of the political arena, sentiment towards the U.S – China trade talks and today’s vehicle sales figures out of China will also influence.

At the time of writing, the EUR up by 0.18% at $1.1316.

For the Pound

It’s a quiet day on the data front, leaving the Pound in the hands of Brexit chatter through the day. For now, the focus is on Theresa May’s attempts to unite parliament but, should there be a lack of progress and the prospects of a no-deal departure rise, more ministers could state support for a vote against a no-deal Brexit.

At the time of writing, the Pound was up by 0.19% at $1.2914.

Across the Pond

It’s a quiet day ahead, with the U.S markets closed for President’s Day, a celebration of George Washington’s birthday. While there are no stats to consider, weak economic data out of the U.S through the last week and political wrangling on Capitol Hill have left the Dollar on the defensive going into the week.

At the time of writing, the Dollar Spot Index was down by 0.17% to 96.735.

For the Loonie

Canadian markets are also closed today. With no economic data scheduled for release, the direction will come from risk sentiment through the day. While trading volumes will be on the lighter side, positive updates from trade talks between the U.S and China should provide support early on.

The Loonie was up by 0.09% to C$1.3232, against the U.S Dollar, at the time of writing.

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