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Global market watch - 16th January 2019

USD  
The Greenback is trading firmer or sideways against most of its major rivals this morning on a flight to quality as Treasury yields rose to a six-day best. Domestic premarket stock futures are pointing higher while the Nikkei closed lower at the end of the Asian session, and both the FTSE 100 and Dax Performance Index are trading down at this time. Notably, however, the previously hawkish Kansas City Federal Reserve Bank President Esther George urged her colleagues to be patient in raising interest rates further in line with the recent FOMC Minutes and Fed speakers. The ongoing longest partial Federal Government Shutdown in history is beginning to weigh on the domestic economy, which is even causing some analysts to think it could speed up both a domestic and global economic shutdown faster than previously expected.  Interestingly, this led to some Dollar buying on uncertainty and quality this pushing the Greenback to a fresh twelve-day best in its pairing with the Euro and Swiss Franc today, largely sideways in its pairing with the Loonie as WTI Crude Oil touched its 5-day best overnight, its one-week best versus the Japanese Yen today, a six-day high with the Aussie Dollar along with one-week peak against the Kiwi this morning, its one-week high versus the Chinese Yuan overnight, along with ticking up in its pairing with the Mexican Peso this morning. Cable is actually trading higher morning after the sharp intraday drop on GBPUSD to an 11-day low yesterday as there is building expectation of the UK parliament extending or indeed revoking Article 50 after the worst legislative defeat for a UK government ever yesterday.  The Federal Reserve Beige Book is on tap for this afternoon in a light day for domestic economic data today.  Market participants will also be watching the beginning of a two-day G20 Meeting tonight with an eye to global trade policy.
 
CAD
The Loonie is trading largely sideways with the generally firmer Greenback this morning as WTI Crude Oil prices were firm and indeed touched a five-day peak overnight. EURCAD touched a fresh one-month low overnight while CADJPY hit a five-month peak today.  There is no Canadian data on tap for today with the ADP Non-Farm Employment Change tomorrow followed by the key Canadian CPI MoM number on Friday morning as well as Foreign Securities Purchases at the same time.  Market participants will be specifically eyeing the G20 Meeting starting this evening today for any global trade news also.

EUR
The Euro is trading broadly lower this morning as market participants are becoming more apprehensive of a significant economic slowdown in the European Union at this time. The single currency fell to a 12-day low versus the Buck overnight, its fresh one-month low versus the Canadian Dollar today, while also dropping to a 49-day low against the generally firmer British Pound as well. The German GDP number reflected the weakest annual growth since 2013 yesterday, while European Central Bank (ECB) President Mario Draghi admitted that economic developments in the Eurozone have been weaker than expected recently. Eurozone Industrial Production figure on Monday was the worst since October 2014 as well, the ECB Monetary Policy Meeting Minutes also stressed caution and downside risks last Thursday morning, while the ECB Flash CPI Estimate YoY release on Friday 4 January was its eight-month low as well.  While the Eurozone is not officially in a recession at this time, recent data is firming expectations that its very close.

GBP
The British Pound is trading essentially sideways versus the Buck compared to open yesterday, and higher against many other rivals, after a sharp intraday drop on Cable yesterday to an 11-day low right before the key vote in parliament which overwhelming voted against Prime Minister Theresa May’s Brexit deal yesterday.  The 230 vote defeat was the widest margin of defeat ever for a sitting UK government. As such, Labour Leader Jeremy Corbyn did call for an election this morning as he seeks to oust the PM at the moment.  While a no-deal Brexit could lead to a short-term economic slowdown in the UK in the near future, market participants seem optimistic that Article 50 will be revoked or extended at this time. The EU said that it was “horrified” by the scale of defeat of the Brexit deal but added that it was not open to renegotiation. It may be pertinent to remember that if a deal is finally agreed, the EU receives £39 billion from the UK. Sterling fell on the initial result but rallied hard afterwards on news of the confidence vote, as the market assumes that the government will win it later today.  The UK CPI YoY release today was on target at +2.1% this morning, while HPI YoY and RPI YoY both missed, the PPI Output MoM came in worse than expected while PPI Input was a little better than consensus for today.  That said, all eyes are on a potential no-confidence vote on the PM coupled with a potential general election, along with especially how Brexit will proceed in the near future.

RoW
The Buck rose to a six-day high versus the Aussie along with a one-week peak against the Kiwi on rising risk aversion coupled with the general flight to quality in this session reflected by lower equities in Asia, Europe, along with the UK today, and ahead of the G20 Meeting starting late today with an eye to any trade news.

The Yen fell to a one-week low versus the generally firmer Dollar as the 10-year Treasury yield increased overnight and market participants were in a flight to quality despite a bit of risk aversion which usually supports the currency.  Japanese PPI YoY came in at a disappointing April 2017 low of +1.5% compared to +1.8% forecast in the evening while Core Machinery Orders MoM were flat versus +3.3% consensus as well.   Bank of Japan Governor is on tap to speak late this evening along with the start of the G20 Meeting which could hopefully address some trade issues.

The Swiss Franc has fallen broadly, including a twelve-day low versus the Buck today, on Euro weakness coupled with general USD buying on a flight to quality.

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