Will it be a Valentines Day Massacre for the Dollar?

Wednesday February 14: Five things the markets are talking about

Are financial markets justified going from a growth story to an inflation narrative?

Today’s U.S consumer price index (08:30 am) is being touted as one of the most significant economic releases in a number of years as capital markets seek to understand the recent plunges in global equities and sovereign bonds.

With investors already on edge, they are expected to renew this months convulsion on any sign that U.S inflation is exceeding expectations at a rate that may entice the Fed to quicken its plans for tightening monetary policy.

Already this month, after a stronger U.S non-farm payroll (NFP) print and wage numbers, investors have sent U.S Treasury yields aggressively higher and instigated a rout in equities that pushed them into the first correction in 18-months.

Note: Market expectations are looking for the core-CPI (ex-food and energy) to rise +1.7% in January y/y compared with the +1.8% increase in December. U.S retail sales are also out this morning and are expected to have increased for a fifth consecutive month.

A higher CPI will give the USD strength, lead to higher yields and lower equity prices, but a tepid headline print could cause more of a problem, especially with record short U.S 10-year treasury position and a market focusing on President Trump’s proposed budget and the rise in U.S twin deficits.

Note: Lunar New Year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.

1. Stocks mixed reaction

In Japan, the Nikkei share average dropped to a fresh four-month low overnight as investor sentiment was again sapped by worries about U.S inflation data due this morning. The Nikkei ended -0.4% lower, its lowest closing since early October. The broader Topix fell -0.8%.

Down-under, the Aussie S&P/ASX 200 index fell -0.3%, following a +0.6% rise on Tuesday. In S. Korea the Kospi closed out the overnight session up +1.1%, helped by a +3% jump in Samsung.

In Hong Kong, shares rebound sharply ahead of Lunar New Year holiday. Trading will resume on Feb 20. At close of trade, the Hang Seng index was up +2.27%, while the Hang Seng China Enterprises index rose +2.14%.

In China, stocks rebounded overnight, but volumes were thin, as many traders had already left for the weeklong Lunar New Year holiday. Chinese markets will reopen on Feb. 22. At the close, the Shanghai Composite index was up + 0.46%, while the blue-chip CSI300 index was up +0.8%.

In Europe, regional indices trade higher across the board following a rebound in Wall Street yesterday and strength in U.S futures this morning.

U.S stocks are set to open in the black (+0.4%).

Indices: Stoxx600 +0.7% at 373.2, FTSE +0.7% at 7216, DAX +0.7% at 12286, CAC-40 +0.6% at 5139, IBEX-35 +0.5% at 9693, FTSE MIB +0.2% at 22071, SMI +0.9% at 8832, S&P 500 Futures -+0.4%

2. Oil dips on looming oversupply and weak U.S dollar, gold higher

Oil prices have dipped overnight, pressured by lingering oversupply including rising U.S inventories. However, the prospect of Saudi output dropping next month, economic growth hopes and a weaker U.S dollar all combined to limit losses.

Brent crude futures are at +$62.68 per barrel, down -4c. Brent was above +$70 a barrel earlier this month. U.S West Texas Intermediate crude futures are at +$59.06 a barrel, down -13c from yesterday’s close. WTI was trading above +$65 in early February.

On Wednesday, the Saudi energy ministry said that Saudi Aramco’s crude output in March would be -100k bpd below this month’s level while exports would be kept below +7m bpd.

Stateside, yesterday’s API report showed that U.S crude inventories rose by +3.9m barrels in the week to Feb. 9, to +422.4m.

Note: That is due to soaring U.S crude production, which has jumped by over +20% since mid-2016 to more than +10m bpd, surpassing that of top exporter Saudi Arabia and coming within reach of Russia, the world’s biggest producer.

Oil traders will take their cue from today’s EIA print (10:30 am EDT) and U.S inflation release.

Ahead of the U.S open, gold prices have rallied for a third consecutive session overnight to hit a one-week high, buoyed by a weaker U.S dollar, while the market awaits U.S inflation data for clues on the pace of future Fed rate increases. Spot gold is up +0.3% at +$1,332 an ounce.

3. Sovereign yields little changed

Earlier this morning, Sweden’s Central Bank (Riksbank) kept their repo rate unchanged at -0.5%. Deputy governor Henry Ohlsson voted to raise rates, but the central bank’s signals on inflation were more downbeat. The inflation forecast for this year was downgraded to +1.8% from +2%. The statement indicated that policy makers would start raising the rate in H2 of 2018. Policy makers stressed that was important not to raise the rate too early and was committed to stimulus to prevent inflation setbacks.

Elsewhere, fixed income seeks guidance from today’s U.S CPI release. The yield on U.S 10-year Treasuries fell less than -1 bps to +2.83%. In Germany, the 10-year Bund yield declined -2 bps to +0.74%, while in the U.K, the 10-year Gilt yield dipped -1 bps to +1.618%. In Japan, the 10-year JGB yield decreased -1 bps to +0.07%, the lowest in more than five weeks.

4. Dollar on soft footing

The USD remains on soft footing ahead of key Jan CPI data for the U.S.

The EUR/USD is steady, trading atop of the €1.2350 area after various European GDP data highlighted better economic growth prospects (see below).

USD/JPY tested ¥106.85 overnight for 15-month lows. The pair came off its worst level to approach 107.50 just ahead of the N.Y session after Japanese officials reiterated that they had no comments on forex levels.

In S. Africa, political optimism that President Zuma would resign has sent the ZAR currency to its best level in nearly two-years outright. The South African Democratic Alliance (DA) leader Maimane (opposition) has stated that its motion to dissolve parliament was processed by Speaker. USD/ZAR is at $11.85 ahead of the open stateside.

The Swedish krona has been volatile after the Riksbank interest rate decision. The krona briefly rose soon after the announcement, but has since pared those gains EUR/SEK last trades flat on the day at €9.9163, compared with €9.8952 before the decision.

5. Euro-zone economy ends 2017 on a high note

Note: There were a number of European GDP releases in the Euro session highlighting better economic growth prospects – Germany mixed; Netherlands beat and Italy a miss.

Industry helped drive the euro-zone’s +0.6% expansion in Q4. This morning’s ‘flash’ estimate of Q4 GDP is the second release and confirms that quarterly growth slowed a tad from Q3’s +0.7% to +0.6%.

There is no breakdown until the next release; however, expenditure evidence would suggest that weaker consumer spending growth was the main driver of the slowdown, while investment expanded after Q3’s contraction and net trade again made a positive contribution to growth.

Digging deeper, industry appears to have made a stronger contribution to GDP growth than in Q3. Following the consensus-beating +0.4% monthly rise in IP in December.

Forex heatmap

USD Under Pressure as Traders eye U.S Inflation

Tuesday February 13: Five things the markets are talking about

Euro equities are trading steady despite a late down swing in Asia, as investors wrestle to find direction after this month’s early collapse.

The dollar has weakened against G10 currency pairs while Treasuries have edged a tad higher along with gold. Crude is heading for its first advance in eight sessions.

Investors are looking to tomorrow’s U.S. consumer-price data for some clues on direction, given that pressure on stocks have been stemming from the outlook for inflation.

The market is expecting U.S consumer-price index to probably increase at a moderate pace last month along with U.S retail sales – both due out tomorrow.

Note: Lunar New Year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.

1. Stocks mixed review

In Japan, the Nikkei share average closed at a four-month low overnight as investors turned somewhat risk averse as the yen rallies outright. The Nikkei ended -0.7% lower, its lowest closing level in four months.

Down-under, Aussie shares tracked Wall St into positive territory. The S&P/ASX 200 index rose +0.6% at the close of trade, after a -0.3% yesterday. In S. Korea, the Kospi climbed +0.35%.

In Hong Kong, stocks rose overnight, tracking a global rebound, on bargain hunting. At close of trade, the Hang Seng index was up +1.29%, while the Hang Seng China Enterprises index rallied +0.88%.

In China, stocks rebounded, supported by investor sentiment aided by signs of government support and record bank lending last month. At the close, the Shanghai Composite index was up +1%, while the blue-chip CSI300 index was up +1.19%.

In Europe, regional indices trade mostly lower taking the lead from weaker U.S futures. The FTSE trades little changed following a slightly hotter CPI reading, as Gilt yields pare declines.

U.S stocks are set to open in the ‘red (-0.6%).

Indices: Stoxx600 -0.1% at 372.7, FTSE flat at 7173, DAX -0.1% at 12266, CAC-40 -0.1% at 5133, IBEX-35 -0.6% at 9708, FTSE MIB -0.5% at 22215, SMI -0.3% at 8799, S&P 500 Futures -0.6%

2. Oil prices firm on weaker dollar, gold higher

Oil prices are better bid, supported by a rebound in global equities, as well as by a weaker dollar, which potentially supports more fuel consumption.

Brent crude futures are at +$62.97 per barrel, up +38c, or +0.6% from Monday’s close. U.S West Texas Intermediate (WTI) crude futures are at +$59.60 a barrel, up +31c or +0.5% from yesterday’s settlement.

The stronger prices came after crude registered its biggest loss in two years last week as global stock markets slumped.

Nonetheless, rising U.S production continues to undermine the efforts led by the OPEC and Russia to tighten markets and prop up prices.

Note: U.S oil production has rallied above +10m bpd, overtaking top exporter Saudi Arabia and coming within reach of top producer Russia.

There are also strong signals the output will rally further. Data last Friday showed that U.S energy companies added 26 oilrigs looking for new production, boosting the count to +791, the highest since April 2015.

Gold prices have hit a one-week high overnight, aided by a weaker dollar and as the market awaits for tomorrow’s U.S inflation data for clues on the pace of interest rate hikes. Spot gold is up +0.4% at +$1,327.81 an ounce.

Note: Yesterday, the yellow metal rose +0.5%, its biggest single-day percentage gain in more than one week.

4. Sovereign yields fall

G7 sovereign bond yields look attractive across the curve after yields rallied on a recovering global economy and on expectations central banks will tighten policy faster than previously thought.

With the lack of economic market news the fixed income market looks attractive and reason why yields fell in the overnight session.

The yield on U.S 10-year Treasuries fell -3 bps to +2.83%, the biggest drop in more than a week. In Germany, the 10-year Bund yield declined -2 bps to +0.74%, the lowest in a week, while in the U.K the 10-year Gilt yield has dipped -1 bps to +1.601% despite the higher inflation print (see below).

4. Sterling reaction muted

The pound (£1.3896) has edged a tad higher after U.K January annual inflation unexpectedly remained at +3% (see below) as worries about the U.K. getting a transitional deal after breaking up from the E.U persist. EUR/GBP trades down -0.1% at €0.8868. Although the high inflation number will add to expectations for another BoE hike, futures prices would suggest that the market has priced in two rate increases for the next 12-months.

Note: PM Theresa May’s government will aim to address the Brexit transition in a series of six speeches by the prime minister and other senior ministers in the next few weeks, which her office dubbed “The Road to Brexit.” May’s first speech is to be delivered at a conference in Munich next Saturday, while Foreign minister Boris Johnson will begin the series with a speech tomorrow.

Elsewhere, the USD is modestly lower as President Trump’s proposed budget brings into focus the U.S twin deficits. The EUR/USD (€1.2337) is higher by +0.2%, while USD/JPY (¥107.55) is lower by -0.9% as fixed income dealers ponder the limits of an expansionary BoJ policy.

5. U.K inflation above target in January

Data this morning showed that U.K consumer prices rose +3% y/y in January. This headline print suggests that the Bank of England (BoE) case for higher borrowing costs is somewhat justified to bring borrowing costs back to its +2% annual goal.

The ONS said that the price gains were driven by clothing, footwear and recreational goods and services, especially tickets for zoos and gardens.

Note: Market consensus was expecting annual inflation in January to slow to +2.9%, from +3% m/m.

U.K Inflation has been above the BoE’s +2% annual target for 12-consecutive months. Last week the BoE said that they expected to raise interest rates at a swifter pace than they anticipated last year to contain growth in prices.

Note: The BoE raised its benchmark rate for the first time in a decade in November, to +0.5%. Futures prices suggest that the central bank will lift it again as soon as May.

Forex heatmap

A day of calm

A day of calm

Equity markets have begun the week on a somewhat positive not picking up from Friday rebound as bargain hunters have returned on the first sign of stability. I guess if you owned a stock for fundamental reasons seven days ago and its 5 % lower this week, why not add to the portfolio? So the story goes.

While the Vix has pulled back to the 25 zone, it’s very trying to view this weeks stock market bounce anything other than technical correction after critical Global benchmarks had one of the there worst performances in years. However, the market is trying to find a positive equilibrium, and if we can get through this week’s critical US CPI relatively unscathed, then it would most certainly look as if last week was little more than a corrective episode rather then the commencement of a bear market.

None the less, government bond yields have found some stability after yields moved higher, albeit in very thinly traded Bond markets.
But certainly adding to the semblance of calm which has started the week. But concerns abound that the Bond Markets have only begun to factor in both the global reflation trade and burdening supply which could drive US bond yields considerably higher.

Oil  Markets

Ignoring US supply-side concerns, OIl markets attempted to make a half-hearted recovery overnight on little more than an equity market correlated bounce and indeed the weaker USD added to the momentum.

Despite the Oil market exhibiting all the hallmarks of technical trading, toppling from massively overbought conditions to retracing on an equity correlated bounce. But technical momentum or not, with the EIA data around the corner, it’s hard not to overlook their expectations that U.S. crude output may rise to 11 million bpd by the end of the year.

However, global demand remains firm, and despite the shale oil boom the supply tightening narrative remains prevalent with OIL towing the line.

Battle lines are forming in an around the WTI 60.00 bpd level which should make for an exciting market this week.

Gold Markets

Gold prices were supported by a weaker dollar and physical demand ahead of Chinese lunar new year. The equity market carnage has abated, and the waves of cross assets selling to replenish equity margins have temporarily decreased providing a calmer market to re-establish Gold longs. But prices should remain within a range ahead of this week US inflation data as the US CPI will be a monster print for the markets inflation views and could provide a catalyst for Gold to bounce higher.
Currency Markets

The US dollar traded lower as currency traders are analysing the rebounding global equity markets. Lots of noise but little momentum as traders are keying on this week’s US CPI with volumes and liquidity density much lower to start the week.

Japanese Yen

The markets continue to digest the potential FX trading leverage cap for individuals in Japan. Mrs Watanabe was a considerable player in the market( especially for Retail brokers), so we’re keeping a close eye on the developments

As for the Yen, we seem to be at a crossroads in all Asian markets with currency markets barely budging looking for some inflation clarity in Wednesday CPI. The fear is that a higher print will send bond yields sky high and equity markets will tumble once again.

Australian Dollar

A rebound in risk sentiment has seen USD haven hedged unwind and buoyed commodity markets.As such, the Aussie dollar has found some solid footing this morning
Malaysian Ringgit

We’re at a bit of a crossroads this week as the markets are grappling with inflation versus the global growth narrative.

An uptick in inflation will lead to higher yields and will present the most significant headwind for the Ringgit. While the market has priced in 3 US rate hikes for 2018, a sudden uptick in US inflation could quicken the pace of the FED interest rate normalisation and could weigh negatively on regional sentiment.

We expect the market to trade in a tight range ahead of this domestic GDP and US CPI. Both monster data points for the Ringgits near-term fate

FX and Equities Brace for a Bumpy Week

Monday February 12: Five things the markets are talking about

Investors are bracing for another bumpy ride this week after market volatility has returned with a vengeance, delivering the biggest rout in global stocks in a number of years.

Despite stocks getting a reprieve overnight, investor fears of interest rate hikes that started the market correction continues to persist.

Last week, the CBOE volatility index ended almost three times higher than its Jan. 26 level. The ten-year Treasury yield finished last week atop of where they started at +2.85%.

Stateside, this week’s inflation report – U.S consumer-price data on Wednesday – could be the catalyst for a major struggle between equities and bonds that triggered the initial market turbulence.

Elsewhere, while the coming week is absent of G10 central bank meetings, there are a number of important economic indicators to be released. In the U.K, consumer and producer price indexes and retail sales for last month should be a challenge for the pound (£1.3560). While in Japan, its first estimate of Q4 growth along with last month’s producer price index and December’s machinery orders (a proxy for capital spending) should be capable of moving the yen (¥108.70).

Later today, President Trump will deliver his 2019 budget blueprint.

1. Stocks breath a ‘sigh of relief’

Global equities overnight have found some temporary support while volatility remains elevated.

Note: In Japan, equity markets were closed due to a bank holiday Feb. 12, while Chinese New-Year celebrations for the ‘Year of the Dog’ begin (Feb 15-21) and follow across much of Asia, including Hong Kong, Taiwan, Singapore, Malaysia and Indonesia.

Down-under, the Aussie S&P/ASX 200 was down -0.6%, weighed down by a fresh -1.6% drop in the energy sector, while in S. Korea, the Kospi rallied +0.4%.

China and Hong Kong stocks rebounded after last week’s aggressive sell-off. In China, the Shanghai Composite index was up +0.8%, while China’s blue-chip CSI300 index was up +1.3%. In Hong Kong, the Hang Seng Index was up +0.71%.

In Europe, regional indices are trading sharply higher across the board following on from a sharp rebound on Wall Street Friday and positive Asian markets.

U.S stocks are set to open deep in the ‘black (+1.2%).

Indices: Stoxx600 +1.5% at 374.1, FTSE +1.2% at 7181, DAX +1.9% at 12336, CAC-40 +1.5% at 5153, IBEX-35 +1.5% at 9785, FTSE MIB +1.1% at 22404, SMI +1.8% at 8831, S&P 500 Futures +1.2%

2. Oil prices rally +1%, gold higher

Oil prices start the week better bid, recovering some of this month’s steep losses as global equities find some firm footing after last week sea of red.

Brent crude futures are at +$63.54 per barrel, up +75c, or +1.2% from Friday’s close. U.S West Texas Intermediate (WTI) crude futures are at +$60.04 a barrel – that’s up +84c, or +1.4% from the close.

The stronger prices came after crude registered its biggest loss in two years last week as global stock markets slumped.

Nonetheless, rising U.S production continues to undermine the efforts led by the OPEC and Russia to tighten markets and prop up prices.

Note: U.S oil production has rallied above +10m bpd, overtaking top exporter Saudi Arabia and coming within reach of top producer Russia.

There are also strong signals the output will rally further. Data on Friday showed that U.S energy companies added 26 oilrigs looking for new production, boosting the count to +791, the highest since April 2015.

Ahead of the U.S open, gold prices have edged a tad higher as the dollar eased against G7 currency pairs after last week’s rally. Expect investors to take their cues from this weeks U.S inflation data. Spot gold is up +0.3% percent at +$1,320.19 an ounce.

Note: Prices touched their lowest since Jan. 4 at +$1,306.81 last week.

3. Sovereign yields creep higher

U.S and eurozone government bond yields have edged higher overnight, heading back towards multi-year highs on unease that a pick up in inflationary pressures globally and a strong domestic economy will encourage the ECB and the Fed to signal to be more aggressive than originally priced in at the beginning of the year.

In Europe, bond yields across the bloc were +1-2 bps higher in early trade, while in the U.S the 10-year note trades atop of its four-year highs.

In Germany, the 10-year Bund yield is up almost +2 bps at +0.77% and within sight of its nearly three-year high hit last week at around +0.81%. The yield on the U.S 10-year note has rallied +4 bps to +2.90%, the highest in more than four years, while in the U.K, the 10-year Gilt yield has gained +4 bps to +1.605%.

4. The U.S dollar’s quiet trading session

A broad-based flight to safe haven, such as U.S treasuries or the Japanese yen (¥108.70), has not happened to date despite the recent turmoil on equity markets.

The dollar ‘bulls’ are looking for the USD to rally this week, despite financial market volatility to remain high near-term as looser U.S fiscal policy and upside risk to U.S. inflation raises concerns.

Overnight, FX saw a quiet session ahead of some key inflation data this week (U.K Jan CPI Feb 13 and U.S Jan CPI on Feb 14).

Note: The recent pick up in global bond yields has been led stateside, while capital market wait for more details from President Trump’s budget and his infrastructure plan.

EUR/USD (€1.2272) is little changed, but holding below the psychological €1.23 handle. On the weekend, ECB’s Nowotny (Austria) reiterated the concerns about attempts by the U.S to politically influence the exchange rate.

GBP/USD (£1.3860) trades atop of Friday’s close despite the BoE having turned more rates ‘bullish’ last week. Dealers are now putting more weight on Brexit concerns as the U.K previously admitted that the growth potential of the economy had declined.

USD/JPY (¥108.70) is steady as Japanese markets were closed for a bank holiday.

5. Swiss inflation still super low

Data this morning showed that Swiss consumer prices slid -0.1% in January from December leaving the annual inflation rate at +0.7% and slightly below expectations.

Digging deeper, the decrease compared with the previous month is due in particular to the decrease in prices for outpatient hospital medical services. Prices for air transport also declined, along with prices for clothing and footwear, in particular because of sales. In contrast, prices for overnight stays in hotels, heating oil and electricity increased.

Inflation is still low despite the Swiss National Bank’s (SNB) efforts to raise it through negative interest rates and a willingness to intervene in currency markets.

Forex heatmap

Equities Lose $5 Trillion as Bulls Slay Bulls

Friday February 9: Five things the markets are talking about

**Stateside, the House of Representatives has approved the bill to fund the U.S government and has raised spending limits over two-years, it is now sending the measure to President Trump.**

Investors should expect market turbulence to continue this year as pullbacks and volatility become more common in the wake of rising central bank interest rates and sovereign bond yields.

The growing consensus is that increasing market volatility should not be capable of derailing the underlying economic expansion or fundamentally dent risk assets, it does however make many things less predictable.

Ahead of the U.S open, European stocks have pared their decline and U.S stock futures have gained despite an Asian session seeing red, with China’s bourses tumbling the most in 24-months.

Elsewhere, Treasury yields have backed up to trade atop of their four-year highs as the ‘buck’ edged lower. Crude oil is heading towards its worst week in 12-months on concerns of over growing U.S supply and gold prices have temporarily stopped the bleeding.

On Tap: Canadian employment numbers are out at 08:30 am EDT. Is the market about to see a deep revision to the last two-months of massive job gain headlines?

1. Stocks Sea of red

In Japan, the Nikkei share average tumbled again overnight, mirroring Wall Street’s losses, with oil-related equities leading the broad declines as crude prices slumped. The Nikkei finished down -2.3%, bringing its weekly loss to -8.1%. The broader Topix was -1.9%, down -7.1% for the week.

Down-under, Aussie shares slumped to a near four-month low overnight hammered by renewed selling on worries of higher inflation and interest rates. The S&P/ASX 200 index fell -0.9%. The benchmark has declined -4.6% on the week, its biggest loss in over 24-months. In S. Korea, the Kospi index fell -1.8%.

In Hong Kong, stocks crumble and cap the biggest weekly fall since the global financial crisis. At close of trade, the Hang Seng index was down -3.1%, the Hang Seng China Enterprises index fell -3.87%. For the week, the Hang Seng tumbled -9.5%, the biggest weekly loss since October 2008, while the HSCE posted a weekly loss of -12.01%.

In China, stocks were crushed and suffered their worst day in almost two-years, with blue-chip led carnage dragging the markets into correction territory. The benchmark Shanghai Composite Index tumbled -4.0% and the blue-chip CSI300 ended the day down -4.3%.

In Europe, regional indices trade mostly lower, but are off their session lows after a rebound in U.S futures ahead of the open stateside. Increased outlook for higher rates from the Bank of England (BoE) is weighing on the FTSE.

Indices: Stoxx600 -0.5% at 372.1, FTSE -0.4% at 7144, DAX -0.3% at 12221, CAC-40 -0.4% at 5129, IBEX-35 -0.7% at 9689, FTSE MIB -0.3% at 22407, SMI +0.1% at 8768, S&P 500 Futures +0.7%

2. Oil slides towards steep weekly loss as supply fears mount, gold higher

Oil prices are on track for their biggest weekly loss in 10-months after hitting new lows overnight after data this week showed U.S crude output had reached record highs and the North Sea’s largest crude pipeline reopened following an outage.

Brent futures are down -30c at +$64.51 a barrel. Yesterday, Brent fell -1.1% to its lowest close since Dec. 20. U.S West Texas Intermediate (WTI) crude is down -42c at +$60.73 a barrel, having settled down -1% Thursday, its lowest close since Jan. 2.

Note: Brent futures have lost around -9% from their four-year January high print of +$71. Futures positions suggest that investors are sitting on the largest ‘bullish position in history.

Earlier this week, the U.S. Energy Information Administration (EIA) upped its 2018 average output forecast to +10.59m bpd, up +320k bpd from its last forecast 10-days ago.

Note: The output is now higher than the previous bpd record from 1970 and above that of top exporter Saudi Arabia.

Ahead of the U.S open, gold prices have edged a tad higher after hitting more than one-month lows yesterday, as the correction in equities drove investors towards safe-haven assets like gold. However, gold ‘bulls’ should expect a stronger U.S dollar and concerns over rising global interest rates to keep gains somewhat capped. Spot gold is up +0.1% at +$1,320.72 an ounce.

Note: On Thursday, gold prices touched their lowest since Jan. 4 at +$1,306.81 an ounce.

3. Equity pain brings relief to bonds

The Eurozone and U.S bond yields have edged a tad lower as renewed global stock selling has managed to lend some support to safe-haven debt markets.

Bond yields have been backing up aggressively all week as investors brace for an end to easy-monetary policies by G7 central banks.

Note: Yesterday’s more hawkish than expected Bank of England (BoE) was the latest catalyst to cause fixed income to steepen sovereign yield curves.

The yield on U.S 10-year Treasuries has decreased less than -1 bps to +2.84%. In Germany, the 10-year Bund yield fell -1 bps to +0.76%, while in the U.K the 10-year Gilt yield declined -2 bps to +1.617%.

4. Dollar jives and dips

Market risk aversion sentiment remains to the fore, but the G10 forex pairs continue to stay locked within their recent ranges. The U.S dollar bull, and they are dwindling; maintain that it’s the Fed who may be caught behind the curve on rates. Next week’s U.S CPI may very well put the ‘cat amongst the pigeons.’

Note: The greenback has caught a bid now that the House of Representatives has approved the bill to fund the U.S government.

Elsewhere, the EUR/USD (€1.2254) is little changed, the pound continues to benefit, albeit struggling after the U.S funding announcement, from the Bank of England saying on Thursday that it expected to “increase interest rates earlier and faster” than previously projected, seen by many to mean a likely May rate rise.

The Chinese currency is on track for its first weekly loss in nine-weeks as the yuan (¥6.3400) has weakened against the dollar in thin volume.

5. U.K industrial output falls on North Sea pipeline shutdown

Data this morning showed that U.K. manufacturing continued to grow in the final month of 2017, but overall industrial production fell by more than anticipated due to an emergency shutdown of a North Sea pipeline.

In monthly terms, U.K. factory output grew by +0.3%, in line with market expectations, the eighth consecutive month of growth.

However, overall industrial production, meanwhile, declined by -1.3%, +0.4% more than forecast.

Separately, the ONS said that the U.K.’s trade deficit widened in December, driven by increased oil imports and rising prices. The December goods trade deficit stood at -£13.6B – significantly wider than expected (-£11.8B e)

Forex heatmap

Hawks coming home to roost

Hawks coming home to roost

Equity markets were trounced on the back of Global yields parading to multi-year highs Thursday. Indeed, it was less dovish Fed speak that continued to be the driver, and the BoE provided a hawkish bounty for good measure.

The ruckus in the bond pits these days appears hell-bent on marching towards 3 % 10Year UST yields much quicker than anyone had suspected which suggest equity markets will come under the hammer for some time to come. Yields are becoming the real storyline as a combination of tighter monetary policy and the US burdening deficit leading to more supply, suggests we have crossed a 2.75 % 10Y UST bridge of no return, and the ride could get bumpier for equity investors.

The issue is not so much the 3% level but rather the pace that Bond yields have been rising in the US that is sending the markets into disarray. The rapidity of the moves has caught the markets by surprise, and we are going through the predictable panicked repricing of most asset classes.

Oil Markets

Crude prices continued to tank overnight as the commodity complex has suffered dearly due to the uptick in market volatility. But the toxic combination of rising US output and a stronger US dollar has nullified OPEC production cut momentum.

With the markets factoring in US crude production to continue hitting new record highs through 2018, the supply dynamics suggest a move below $ 60 WTI is in the offing.
Gold Markets
Gold toppled to a five-week low after the Bank of England whispered a sooner and more substantial rate rises after revising their growth and inflation forecast. The quicker than expected shift on Central Bank Monetary Policy outlooks coupled with the rapid increase in US bond yields continues to dampen investor sentiment. However, Gold prices quickly recovered as the equity market drawdowns continue to attract risk off hedges while the Syria Standoff with Turkey is offering support on the geopolitical front.
Currency Markets

The Australian Dollar

The rise in US bond yields has toppled the Aussie dollar and dented risk sentiment as global equity market continues to tumble.

Market volatility is weighing negatively on commodities, add in a dose of dovish RBA rhetoric, and therein lies the heart of the Aussie dollar woes.

Also, the Aussie was trampled on when USDCNH shot up from 6.3050 to 6.3750 as it seems that China is opening up more channels for outflows to slow RMB appreciation. (See below)

The Aussie dollar tends not to flourish in these types of markets.
The $ Bull in the China Shop: Chinese Yuan

The dollar bull was let loose in the China shop yesterday as a confluence of events had trader paring back short US dollar risk from the morning fix.

The fix came in a bit higher than expected which usually causes a bit of a move higher but, it was the article in China Economic Daily that was creating the most noise as the report urges corporates to enhance FX risk management. (Nudge Nudge)
China has also resumed its Qualified Domestic Limited Partnership plan after a two-year halt, granting licenses to about a dozen global money managers that can raise funds in China for overseas investments. While it does not have a massive Foreign Exchange flow impact,  and  more symbolic than anything else,  it is none the less suggestive that the Pboc is less sensitive to capital outflow

Given that positions were skewed short US dollar, the confluence of events had traders covering positions aggressively knowing that liquidity will be sure to dry up the closer we get to Lunar New Year.

The China trade numbers were perceived disappointing ( I have opposite view) which contributed to some currency negativity.

But from any logical perspective, it was hard to ignore the Mainland equity fire sales this week which certainly had a negative bias on currency sentiment

The Malaysian Ringgit

Negative regional currency signals abound.

The rapid repricing higher in US bond yields has taken investors by surprise. Moreover, with US yields looking to push higher, we could be in for a bit more pain before the markets find some solid footing.

Higher US yields are supporting the USD and weighing on global equity sentiment which is hurting overall regional risk appetite.

US record crude production continues to weigh negatively on oil prices.

The proximity of Chinese Lunar New year has traders paring back risk.

The market, at least for now, is hedging against the Fed potentially leaning more hawkish, which is explaining the uptick in USD, US Yields and lower equity markets.

Pound jumps on ‘Hawkish’ BoE

Thursday February 8: Five things the markets are talking about

The global equity markets remain unnerved as U.S bond yields again trade atop of their four-year highs after U.S congressional leaders reached a two-year budget deal to raise government spending by almost +$300B.

The bi-partisan deal is expected to stave off a government shutdown, while at the same time widen the U.S federal deficit even further – bond dealers suggest that it could lead to a faster tightening cycle on inflation worries.

Note: The Senate and the House are both expected to vote on the proposed deal today, amid some opposition on both sides of the aisle.

1. Stocks mixed results

In Japan, the Nikkei share average rallied overnight, driven higher by bargain hunters. The Nikkei ended up +1.1%, but has still lost nearly -6%on the week. The broader Topix rose +0.9%.

Down-under, shrugging off early weakness on falling commodities stocks, the Aussie benchmark finished modestly higher, up for a second consecutive day, the S&P/ASX 200 rose +0.2%.

In Hong Kong, stock prices steadied after a five-day losing streak. At close of trade, the Hang Seng index was up +0.42%, while the Hang Seng China Enterprises index fell -0.43%.

In China, stocks ended lower to post a third consecutive session of losses overnight, with the benchmark Shanghai index hitting a six-month low, despite trade data showing the country’s performance exceeded expectations. At the close, the Shanghai Composite index was down -1.42%, while the blue-chip CSI300 index was down -0.96%.

Note: China trade balance (USD): +$20.3b vs. +$54.7be; Exports y/y: +11.1% vs. +10.7%e, Imports y/y: +36.9% (fastest growth since Feb 2017) vs. +10.6%e. The yuan dropped the most in two-years amid speculation that policy makers will step up efforts to rein it in after trade figures missed estimates.

In Europe, regional indices are trading lower across the board, mirroring the decline in Wall Street yesterday.

U.S stocks are set to open in the black (-0.2%).

Indices: Stoxx600 -0.5% at 378.3, FTSE -0.6% at 7236, DAX -1.0% at 12466, CAC-40 -0.6% at 5226, IBEX-35 -0.8% at 9901, FTSE MIB -0.6% at 22840, SMI -0.2% at 8958, S&P 500 Futures -0.2%

2. Oil slides as U.S output soars, gold lower

Oil prices have hit new six-week lows overnight after data showed U.S crude output had reached record highs and the North Sea’s largest crude pipeline reopened following an outage.

Brent crude futures are down -14c at +$65.37 a barrel, while West Texas Intermediate (WTI) is down -15c at +$61.64 a barrel.

Note: Brent futures have lost around -8% from their four-year January high print of +$71. Futures positions suggest that investors are sitting on the largest ‘bullish position in history.

The U.S. Energy Information Administration (EIA) this week upped its 2018 average output forecast to +10.59m bpd, up +320k bpd from its last forecast 10-days ago.

The output is now higher than the previous bpd record from 1970 and above that of top exporter Saudi Arabia.

Ahead of the U.S open, gold prices have extended their drop and printed a fresh four-week low, on a firmer dollar and market expectations of more U.S rate hikes this year. Spot gold is down -0.4% at +$1,312.41 per ounce.

3. BoE to tighten sooner rather than later

The Bank of England (BoE), as expected, kept rates steady this morning, but indicated it is likely to ‘tighten’ monetary policy “faster and further” than it had anticipated three months ago.

In the BoE’s view, investors had expected one quarter-point rise in 2018 and subsequent years. But at that rate, inflation would still be slightly above target in early 2021, so a slightly more aggressive series of moves is needed.

The BoE vote was unanimous to keep rates at +0.5%. Gilt yields have jumped, with 5-year backing up to +1.066% from +1% before the decision.

Yesterday, the Reserve Bank of New Zealand (RBNZ) again held overnight rates at a record low and projected they will stay there until mid-2019 as inflation remains subdued amid slower economic growth.

“Monetary policy will remain accommodative for a considerable period” according to acting Governor Grant Spencer.

4. Pound jumps on ‘Hawkish’ BoE

Sterling (£1.4035) has rallied aggressively across the board after the BoE brought forward its rate hike expectations – the pound was trading atop £1.3885 before the announcement and EUR/GBP has fallen -0.87% to a new one week low of €0.8750 from €0.8812 beforehand.

USD has consolidated its recent gains after its best daily performance in four months yesterday. The greenback caught a bid after the White House and Senate leaders stated that deal had been reached on a two-year budget that included large increases to both defense and non-defense spending.

Elsewhere, the EUR/USD (€1.2259) remains within striking distance of its two-week low outright as the pair tested €1.2235 in the overnight session. A plethora of ECB speakers have provided little new clues on the outlook for the Eurozone. From the techies, the key support for the pair remains at the psychological €1.21 level.

USD/JPY (¥109.67) is edging back to the upper end of its recent range with the 110 level back in play.

5. German goods exports soar to new records

Data from the German Statistical Office (Destatis) showed that exports of German goods hit a new high last year, amid strong global demand for premium engineering goods.

Exports of goods surged +6.3% to almost €1.3T last year to mark a new record.

Digging deeper, Germany’s plant and machinery makers remain upbeat, with strong demand from China and the U.S. contributing to a +4% rise.

Forex heatmap

Market Jitters Remain

Market Jitters Remain

US stocks toppled again on Wednesday in choppy and messy fashion after a dispirited US Treasury auction revived concerns about a hawkish Fed, unnerving investors already spooked after the rapid climb in US Treasuries apparently ignited a jump in the Cboe Volatility index.

A deplorable auction with meek demand pushed yields on 10-year US Treasuries to 2.84 percent, up four basis points, with traders now eyeing Monday’s a four-year high of 2.88 percent.

The market is now hedging against the Fed potentially leaning more hawkish which is explaining the uptick in USD and US yields.

There was a glimmer of hope earlier in the NY session that equities markets were finding a happy medium, but the equilibrium shattered as optimism gave way to more selling when Federal Reserve Doves see the inflationary lightbulb flicker.

Fed Evans, who dissented along with Kashkari on the December rate hike, has also embraced Kashkari’s new hawkish tone post-Friday’s earnings data. While his baseline remains a hold in rates until mid-year but with on crucial commonition: “In contrast, suppose inflation picks up more assuredly, as many expect. Then, we still could easily raise rates another three or even four times in 2018 if that were necessary. And I would support such a faster pace if the data point convincingly in this direction.”

Of course, this hawkish Fed discourse has elevated market chatter this morning centring on how the  Trump Administration could react if the USD parades higher on a more hawkish Fed. It certainly makes for exciting international intrigue  to the debate in the wake of comments from ECB member Nowotny who charged that the US Treasury is deliberately putting pressure on the USD

Oil Prices

Oil prices have been getting battered by forces beyond the nodding donkey of late. The weaker narrative has been underpinning prices, but with the market shifting to a more hawkish fed description the US dollar slide has come to a blunt halt is now weighing negatively on oil prices. Notwithstanding the unforeseen disorder in the broader financial system has seeped into the oil markets.

With Oil prices ones WTI fell abruptly after the U.S. government reported crude stockpiles rose by 1.9 million barrels. But its the deluge US production that remains the most significant menace to OPEC production cuts. The bottom line is the US crude production should keep hitting new highs throughout 2018 after reaching an all-time higher of 10.25 m barrels per day. 11’s are not that far away.

Gold Prices

Stronger US dollar and higher US Treasury yields have depressed demand for Gold overnight. And with equities souring and with prices continuing to melt away, gold markets could be susceptible to a stock market rebound.

The shifting Fed narrative that is gathering hawkish following could be the most significant thorn in the Gold Bulls side.

Currency Markets

Japanese Yen

The Yen will be traded like a puppet whose strings are manipulated by equities and fixed income price movements.

Australian Dollar

The risk-off moves from Monday’s equity plunge were enough to liquidate short USD and with continued broad de-risking assignments still being played out. I suspect the Aussie bulls with remain in time out corner until we get back above .7850 and a fraction of risk appetite returns. When you view every possible trade scenario as an ambush, probably best to tread cautiously.
The Malaysian Ringgit

The re-emergence of the Federal Reserve Board Hawks and Oil prices looking very susceptible to ramped up US shale oil production continues to weigh negatively on the MYR.

But indeed, the uptick in market volatility has tamed investors appetite, so bullish signals are far and few between

Beware: FX Space is Calm, but Appearances can be Deceiving

Wednesday February 7: Five things the markets are talking about

Risk-averse sentiment seems to have cooled for the time being as a number of the major indexes rebound in the overnight session.

Note: From a volatility standpoint, the forex market space appears tranquil when compared to other asset classes like equities or bonds.

The rebound in equity prices has spread to Europe, but capital markets remain on edge as Asian bourses pared their advance while U.S futures retreated.

Elsewhere, U.S Treasuries have rebounded after yesterday’s slump along with gold and crude prices. The dollar has edged a tad lower as the FX market showed limited reaction to the sharp drop in equities earlier this week.

In Germany, the CDU/CSU, SPD political parties are said to have agreed on a grand coalition treaty.

Up next: Monetary policy decisions are due this week in New Zealand (Today 03:00 pm EDT) and tomorrow in the U.K (07:00 am EDT).

1. Some stocks record small gains

In Japan, equities pared early gains to end a tad higher overnight in a volatile trading session, as investors remained wary of further losses as U.S futures slipped from their highs. The Nikkei 225 share average ended +0.2% higher, while the broader Topix gained +0.4%.

Down-under, Aussie shares rebounded after Tuesday’s biggest one-day drubbing in roughly 24-months. Broad-based buying helped the S&P/ASX 200 index end up +0.8%. The benchmark slumped -3.2% in the previous session. In S. Korea, the Kospi index dropped more than -2%.

In Hong Kong, equities reversed their earlier gains and closed at a five-week low overnight, led lower by material and real estate firms. At close of trade, the Hang Seng index was down -0.89%, while the Hang Seng China Enterprises index fell -2%.

In China, stocks slumped as developers and consumers fall. At the close, the Shanghai Composite index was down -1.81%, while the blue-chip CSI300 index was down -2.38%.

In Europe, regional bourses have rebounded from Monday’s sharp sell off, mirroring Wall Streets moves. However, U.S stock futures (-0.8%) are pointing lower once again as volatility continues.

Indices: Stoxx600 +0.8% at 375.9, FTSE +0.6% at 7187, DAX +0.7% at 12474, CAC-40 +0.6% at 5191, IBEX-35 +0.6% at 9869, FTSE MIB +0.8% at 22518, SMI +1.0% at 8926, S&P 500 Futures -0.8

2. Oil steadies, as lower inventories offset by higher U.S output, gold higher

Oil prices are holding steady, as the boost from a report showing a drop in U.S crude inventories last week was offset by evidence of soaring U.S output.

Brent crude futures are down -11c to +$66.75 a barrel, while U.S West Texas Intermediate (WTI) crude futures have eased -12c to +$63.27 a barrel.

Data yesterday showed that U.S. crude inventories fell by -1.1m barrels in the week to Feb. 2 to +418.4m barrels, helping support the commodity.

However, rising U.S oil production continues to hang over the market. EIA data shows that U.S output has risen by +1m bpd in the last year to about +10m bpd.

Investors will take their cue from todays EIA crude stock report (10:30 am EDT).

Ahead of the U.S open, gold prices have rallied from their three-week low on bargain hunting. Spot gold is up +0.5% to +$1,331.23 per ounce. Prices fell over -1% yesterday to hit its lowest since Jan. 11 at +$1,319.96.

3. Sovereign yields fall

In the Euro session, southern European government bond yields have fallen sharply and have extended their recent outperformance on news of a coalition agreement in Germany viewed as positive for Euro integration.

Germany’s Chancellor Merkel’s conservatives and the Social Democrats (SPD) have agreed “in principle” on a coalition deal. This will take Europe’s economic powerhouse a step closer to a new government. Germany’s 10-year Bund yield has climbed +1 bps to +0.70%.

Italian, Spanish and Portuguese 10-year government bond yields are -5 to -8 bps lower, and spreads over benchmark German Bunds have tightened.

Elsewhere, the yield on 10-year U.S Treasuries has dipped -4 bps to +2.76%, while in the U.K, the 10-year Gilt yield has advanced less than +1 bps to +1.523%.

Overnight, in India the Reserve Bank of India (RBI) statement noted that the decision to keep policy steady (+6%) was not unanimous (5-1) with a dissenter calling for +25 bps hike. It maintained its neutral monetary policy stance and reiterated to keep headline inflation close to +4% target on a durable basis.

4. Dollar has ‘little traction’

From a volatility standpoint, the forex market space appears tranquil when compared to other asset classes like equities or bonds. The U.S dollar continues to be confined to its recent ranges against G10 currency pairs.

The EUR/USD (€1.2346) is a tad lower despite market reports of a grand coalition agreement in Germany. The pair continued to find headwinds above the psychological €1.24 level.

GBP/USD (£1.3884) continues to face headwinds as various press outlets noted that the E.U is prepared to harden its stance during the transition phase of negotiations.

USD/JPY (¥109.07) remains the liveliest of currency pairs, as risk-on and risk-off continues to find capital market leverage.

Note: The Nikkei 225 index did see its initial +2% gain disappear in the final hour of trading.

5. German industrial output slips

Data from Europe this morning revels that Germany’s industrial output slipped at the end of 2017.

Industrial production in December fell -0.6% m/m, led by construction output. Market consensus was looking for a -0.5% decline.

Germany’s economics ministry said manufacturers’ order books signal vigorous production in the coming months. The trend is “clearly pointing up” after reporting a +3.8% monthly gain in manufacturing orders in December on Tuesday.

Forex heatmap

Equity and Crypto Pain Persists

Tuesday February 6: five things the markets are talking about

The global equity rout extended overnight as Asian and European markets followed Wall Street and tumbled, sending equity indexes toward the biggest three-day slide in nearly three-years.

Volatility in stocks has pushed a number of investors to unwind equity bets and head to the ‘mighty’ dollar and the Japanese yen, another haven.

The dollar has also been benefiting from last Friday’s robust U.S employment data. However, despite the greenbacks recent gains, the prospect of faster-than-expected monetary policy tightening abroad has left the buck atop of its lowest level outright in more than three-years.

Note: Yesterday, the VIX saw its biggest daily climb ever, both in percentage and absolute terms.

1. Stocks markets tumble again

Yesterday, U.S. stocks plunged the most in more than six years and volatility roared back into the market as the S&P 500 sank -4.1%.

In Japan, stocks suffered their biggest point drop in 18-months overnight on fears about rising U.S bond yields and a potential pick-up in inflation. The Nikkei share average ended down -4.73%, while the broader Topix fell -4.4%.

Down-under, Australia’s S&P/ASX 200 traded at levels last seen in October as it slide -3%, while S. Korea’s Kospi was the outperformer in dropping just -1.8%.

In Hong Kong, stocks joined the market rout intensified. The benchmark Hang Seng Index plummeted -5.1%, its biggest daily percentage drop since August 2015, while the China Enterprises index HSCE fell -5.9%.

Note: Hong Kong is particularly exposed to U.S rate moves because the HKD is pegged to the U.S dollar.

In China, Shanghai stocks post their worst day in two-years. The Shanghai Composite Index slumped -3.4%, its biggest single-day drop since February 2016, while the blue-chip CSI300 index ended down -2.9%.

In Europe, regional equities move well off its opening levels, but remain in negative territory as U.S futures stage a sharp turn around. Earnings continue to dominate corporate news.

U.S stocks are set to open in the black (+0.6%).

Indices: Stoxx600 -1.9% at 374.8, FTSE -2.0% at 7191, DAX -2.2% at 12409, CAC-40 -1.9% at 5192, IBEX-35 -1.9% at 9884, FTSE MIB -1.5% at 22494, SMI -1.9% at 8927, S&P 500 Futures +0.6%

2. Oil prices ease, gold higher

Oil prices have fallen for a third consecutive session overnight, although the crude price remains in positive territory so far this year.

Oil is caught up in the markets general risk-off move and not helped by the strength of the U.S dollar in the past two trading sessions.

Brent crude futures are down -35c at +$67.27 a barrel, but still up +1% so far in 2018. U.S West Texas Intermediate (WTI) crude futures have eased by -25c to +$63.90.

Note: Since the S&P 500 hit a record high on Jan. 26, the index has lost -8%. Oil, in contrast, has lost -4.5%, while cryptocurrency bitcoin (BTC) has lost -50% of its value.

Adding to the pressure on oil, which hit its highest price in nearly three-years in January, has been evidence of rising U.S crude production, which could threaten OPES’s efforts to support prices.

Data from the U.S government last week showed that output climbed above +10m bpd in November for the first time in nearly fifty-years, as shale drillers expanded operations.

Gold prices have rallied overnight as the global equity rout encouraged investors to seek shelter in safe havens, although expectations of more U.S rate hikes this year will weigh on the market. Spot gold is up +0.3% to +$1,342.95 per ounce, following yesterday’s +0.5% gain.

3. Reserve Bank of Australia (RBA) on hold

The RBA overnight chose to stay out of the global shift among central banks toward higher interest rates, amid deep fears that domestic household debt burden would not stand up well to the pain of rising mortgage costs.

The RBA left its cash rate unchanged at a record low +1.5%, signalling no desire to follow the likes of the Fed, the BoE and the ECB in removing the policy accommodation.

Governor Philip Lowe said he remains hopeful that growth and inflation will trend higher this year, but stressed the big uncertainty is the outlook for consumers.

Elsewhere, investors have been dumping government debt, but for different reasons. In the U.S, investors see more inflation coming; while in the eurozone, they see stronger economic growth.

The yield on U.S 10-year Treasuries has increased +6 bps to +2.76%. In Germany, the 10-year Bund yield decreased -3 bps to +0.71%, while in the U.K, the 10-year Gilt yield has declined -3 bps to +1.53%, and the biggest drop in almost five weeks.

4. Dollar finds little traction

The USD remains on soft footing, unable to gather any safe-haven demand despite the pickup in global volatility.

EUR/USD (€1.2400) continues to maintain within its recent consolidated range, €1.2350-1.25, supported by the market sentiment that the eurozone is expanding robustly with stronger growth rates than previously anticipated.

GBP/USD (£1.3935) remains on the defense, as U.K ministers seem to have a difference of opinion on the Brexit strategy.

USD/JPY ‘s strong correlation with U.S interest yields seems to have broken down as the pair tested ¥109 in the session overnight despite the BoJ’s rhetoric that it would continue advocating an easy monetary policy.

Bitcoin (BTC) briefly traded below $6,000 overnight as weakness in digital tokens continued, with Ripple, Ether and Litecoin also tumbling at least -11%.

Note: The BIS said that central banks must be prepared to intervene to stem risks from digital currencies, as Bitcoin has become a “combination of a bubble, a Ponzi scheme and an environmental disaster.”

5. German factory orders surge

Data this morning showed that German factory orders surged in December.

Orders, adjusted for seasonal swings and inflation, increased +3.8% after dropping a revised -0.1% in November. Demand was up +7.2% from the previous year.

The Bundesbank says the German economy will maintain its momentum. After growing +2.2% last year, GDP is forecast to increase +2.5% in 2018.

Note: Strong domestic spending and prosperous global trade is supporting Germany’s economy. This has helped the country’s largest union win a +4.3% pay increase over 27-months.

Forex heatmap