Are you in the Montreal area?
Register now to attend an
FX Risk Management Seminar.
Hosted by
Karl Schamotta, Senior Market Strategist at the
Montreal Marriott Airport on
January 20, 2011.
Markets Steady Ahead of Friday's Payroll Figures
- Markets Mixed Overnight
- News and Notes From Around the Globe
- Jobs Day Tomorrow
|
Markets Mixed Overnight
Equity markets were mixed overnight in Asia, though Europe has been powering ahead towards the close with gains nearing 1% across the board. The Nikkei in Tokyo hit an 8-month high with a 1.4% gain on improving local risk appetite that has been seeing capital flow into the market and the currency for a time period that is quickly approaching three quarters. Bond yields in Europe, the UK and Japan all advanced while US yields once again retraced overnight, underscoring the momentum in currency markets that saw the USD yield territory to most of the majors. At the same time, gold is suffering its fourth consecutive day of declines to now trade at $1,365.
The Canadian dollar was one of the big winners overnight, not so much on the USD but the crosses as the currency that has been lagging the broader market for months now appears to be playing catch-up given the fact that the Loonie has finally cracked and held the psychological resistance level at parity. That said, while the CAD was well supported overnight, it is coming off of its highs this morning on the release of a much softer than expected Purchasing Manager's Index. Though the reading declined from November's 53.3 result, purchasing activity still held the line at 50.0, which is the dividing line between expansion and contraction.
News and Notes From Around the Globe
The euro continued to trade heavily last night, briefly breaking through significant support at the 1.31 level on mixed local data that was on balance negative for the currency. Euro Zone consumer confidence for December plummeted rather abruptly while retail sales figures also disappointed in falling 0.8% in the month of November alone. German factory orders for the month of November came in much stronger than expected however, likely heading off a rout of the common currency on the day. As might be expected, it appears as though the continent's economic data is souring in line with the ongoing public debt challenges that are being faced across the region. That said, there was a story today in a major Spanish newspaper that claimed that the Chinese were interested in making a major purchase of Spanish government paper – a story that is helping the currency to find a bid with some renewed hope that Spain will not suffer the same fate as Greece and Ireland. At the same time, it must be noted that the spread between 10-year Portuguese and German government bonds widened another 8 basis points overnight, signaling the fact that markets aren't quite as enamored with Spain's smaller neighbor.
The pound sterling traded more erratically than most overnight, with a nearly 1 pence swing in a short space of time on largely negative local data. Fourth quarter mortgage demand in the UK fell through the floor with an outsized decline in the final three months of the year while the UK services PMI declined unexpectedly for the first time since April 2009 in missing the market's consensus estimate of 52.8 with a reading of 49.7 (a figure below 50 indicates a decline in activity, over 50 marks an expansion). That said, increasing yields in both the Euro Zone and UK likely delivered support to both currencies that were otherwise in a downward spiral.
Everyone's favorite flight to safety currency, the Swiss franc, took it on the chin overnight as market risk sentiment firmed despite the fact that interest rate expectations in the country took a turn lower. Swiss CPI came in firmed than expected with a 0.2% increase over November, but the annual figure still came in at a rather anemic 0.5% year over year.
Elsewhere, Aussie building approvals came in lower than expected for the third time in the last four months, leading to further declines in the currency. In Brazil, the central bank announced measures aimed at increasing the ratio of reserves that trading houses must hold to backstop their FX trading positions.
Jobs Day Tomorrow
Traders in both Canada and the US will see employment data tomorrow and most are likely to maintain or even trim their positions ahead of the release of those figures. In this market environment, the focus of the market has been overwhelmingly focused on employment data as the leading, if not only, market indicator that matters in terms of predicting the future health of the economy. For what it is worth, initial jobless claims that are released for the US market every Thursday have been on a downtrend since late October, building the market's expectations of a positive reading out of the US on Friday. That being said, both the market's whisper number and consensus view have been heading northward, with the market now expecting a reading close to 160k+.
0 comments:
Post a Comment