Tag: New Zealand

  • Dollar Recovery Capped by Stocks Rally, S&P 500 Ready for New Record

    Dollar Recovery Capped by Stocks Rally, S&P 500 Ready for New Record


    Despite being pressured in the past few days, Dollar remains relatively resilient, refusing to drop despite renewed selling pressure earlier today. US President Donald Trump’s tariff rhetoric is having a diminishing effect on markets, as traders shift their attention back to fundamental and intermarket dynamics. The first significant market reaction to tariffs is likely to come only after actual implementation, with the initial measures on Canada, Mexico, and China anticipated on February 1.

    A key intermarket factor aiding Dollar’s stability is recovery in US Treasury yields, which is providing some support. However, upside momentum of the greenback is clearly capped by strong risk-on sentiment in equity markets. In particular, S&P 500, currently hovering just inch below its all-time high of 6099.97, is showing robust upward momentum. Decisive break above this level would confirm the resumption of the index’s long term up trend, with upper channel resistance (now at around 6380) as next target.

    For the week so far, Japanese Yen is the weakest performer as markets look past BoJ’s expected rate hike on Friday. Dollar follows as the second worst performer, trailed Loonie. In contrast, Kiwi is still leading gains, despite expectations of another 50bps RBNZ rate cut after inflation data. Euro is supported by ECB officials’ reassurances of gradual easing, making it the second-best performer. Aussie Australian Dollar comes in third strongest, with Sterling and Swiss Franc positioned in the middle of the pack.

    ECB’s Lagarde highlights regular, gradual rate cuts as policy diverges from Fed

    ECB President Christine Lagarde emphasized the central bank’s commitment to a “regular, gradual path” of monetary easing, citing progress in disinflation across the Eurozone.

    Speaking to CNBC, Lagarde reiterated that the pace of rate cuts will depend on incoming data. Meanwhile, she described the neutral rate — where monetary policy neither stimulates nor restricts the economy — as between 1.75% and 2.25%.

    Lagarde also acknowledged the divergence in monetary policy paths between ECB and Fed. She attributed this gap to differing economic circumstances, noting that the two central banks “did not reduce rates at the same pace.” Markets, she said, are pricing in “vastly different monetary policy moves” over the next few months, reflecting these fundamental differences.

    On external risks, Lagarde played down concerns about inflation being exported to Europe from the US, suggesting that any reigniting of U.S. inflation would primarily impact the U.S. economy. She added, “We are not overly concerned by the export of inflation to Europe.” However, she acknowledged potential spillover effects through the exchange rate, which “may have consequences.”

    SNB’s Schlegel: Negative rates remain a tool, despite being unpopular

    SNB Chair Martin Schlegel said today at the World Economic Forum in Davos that with the policy rate currently at 0.50%, “we still have some room” for adjustments. But he ruled out any firm commitment on future rate moves.

    While negative rates remain an unpopular tool in Switzerland, Schlegel noted that the SNB would reintroduce them if deemed necessary to stabilize monetary conditions.

    Looking ahead to the SNB’s next policy meeting in March, Schlegel indicated that the central bank will evaluate whether further rate adjustments are warranted.

    “At the moment monetary conditions are appropriate. We decide from quarter to quarter and then we will see,” he said, refraining from estimating the likelihood of rates turning negative again.

    Schlegel also addressed risks stemming from global uncertainties, particularly the tariff hikes proposed by Trump administration. While he downplayed the direct impact of such measures on Swiss inflation, he acknowledged that heightened global risks could bolster the safe-haven appeal of the Swiss Franc.

    “Whenever there is a crisis, investors tend to buy the Swiss Franc,” Schlegel said, highlighting the currency’s role in monetary conditions alongside interest rates.

    New Zealand CPI unchanged at 2.2% yoy, non-tradeable pressures persist

    New Zealand’s CPI rose 0.5% qoq in Q4 2024, in line with expectations, as tradeable inflation increased 0.3% qoq and non-tradeable inflation rose 0.7% qoq. Annually, CPI was unchanged at 2.2% yoy, slightly exceeding the anticipated 2.1% yoy. This marks the second consecutive quarter that inflation has stayed within RBNZ’s target range of 1% to 3%.

    The data highlights diverging trends within inflation components. Non-tradeable inflation, which reflects domestic demand and supply conditions and excludes foreign competition, stood at 4.5% yoy, highlighting persistent internal price pressures. Tradeable inflation, influenced by global factors, recorded a -1.1% yoy decline.

    Rent prices were the largest contributor to the annual CPI increase, rising 4.2% and accounting for nearly 20% of the overall 2.2% gain. Lower petrol prices, down -9.2% yoy, offset some of the upward momentum, with CPI excluding petrol increasing 2.7% yoy.

    Australia’s Westpac Leading Index falls to 0.25%, signals gradual growth pickup

    Westpac Leading Index for Australia dipped slightly in December, moving from 0.33% to 0.25%. Westpac noted that while the growth signal remains modest, it reflects a marked improvement from the consistently negative and below-trend readings observed over the past two years. This uptick hints at a gradual lift in economic momentum through the first half of 2025.

    Westpac forecasts GDP growth to improve steadily over the course of 2025, projecting a year-end expansion of 2.2%—a notable recovery from the weak 0.8% growth recorded in the year to September 2024. However, the bank noted that while this represents progress, it remains below the economy’s long-term potential.

    Westpac highlighted that recent improvements in the Leading Index coincide with mixed signals on broader economy. A key concern for RBA is the labor market, where the “rebalancing” stalled in H2 2024.

    “A further slowdown in underlying measures of inflation could still see the Bank ease in February or April but we suspect the RBA will need to be more comfortable about some of these risks before it is prepared to begin easing,” Westpac noted.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.9032; (P) 0.9077; (R1) 0.9102; More…

    Intraday bias in USD/CHF stays neutral for now, as the pair is in mild recovery. Price actions from 0.9200 are seen as a near term corrective pattern only. Further rally is expected with 0.9007 support intact. On the upside, decisive break of 0.9223 will carry larger bullish implications. However, break of 0.9007 will turn bias back to the downside for deeper pull back to 55 D EMA (now at 0.8950).

    In the bigger picture, as long as 0.9223 resistance holds, price actions from 0.8332 (2023 low) are seen as a medium term corrective pattern. That is, long term down trend is in favor to resume through 0.8332 at a later stage. However, sustained break of 0.9223 will be an important sign of bullish trend reversal.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD CPI Q/Q Q4 0.50% 0.50% 0.60%
    21:45 NZD CPI Y/Y Q4 2.20% 2.10% 2.20%
    00:00 AUD Westpac Leading Index M/M Dec 0.00% 0.10%
    07:00 GBP Public Sector Net Borrowing (GBP) Dec 17.8B 13.7B 11.2B 11.8B
    13:30 CAD Industrial Product Price M/M Dec 0.20% 0.80% 0.60%
    13:30 CAD Raw Material Price Index Dec 1.30% 0.40% -0.50% -0.10%

     



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  • Kiwi Eases as NZ CPI Backs RBNZ 50bps Cut, Dollar Unmoved by Trump’s Continuous Tariff Talks

    Kiwi Eases as NZ CPI Backs RBNZ 50bps Cut, Dollar Unmoved by Trump’s Continuous Tariff Talks


    New Zealand Dollar softened mildly today as Q4 inflation data reinforced the case for continued monetary easing by RBNZ. The central bank has ample room to swiftly bring interest rate from the current 4.25% to neutral, with inflation staying at around mid-point of 1-3% target range for the second straight quarter.

    Another 50bps rate cut on February 19 should be solidified. However, beyond this, the scale further rate reductions by RBNZ will depend heavily on domestic disinflationary progress, especially in non-tradeable prices, as the effects of falling tradeable prices fade.

    Elsewhere, Dollar’s pull back this week have slowed, but it has yet to stage a convincing recovery. President Donald Trump’s ongoing rhetoric on tariffs continued to draw attention but had little immediate impact on markets. Trump reiterated yesterday his intention to impose a 10% tariff on China, accusing it of enabling fentanyl shipments through Canada and Mexico to the US. He also repeated his threat to target EU with tariffs, calling it the “only way” to achieve trade “fairness”. Markets, however, appeared unfazed, awaiting concrete actions to back Trump’s statements.

    Key dates for tariff announcements include February 1, when decisions on 25% tariffs for Canada and Mexico and 10% tariffs on China are expected. For other countries, tariff measures may be delayed until federal trade reviews conclude on April 1. With no immediate actions, Trump’s remarks seem more rhetorical than actionable.

    In terms of weekly performance so far, Dollar remains the weakest major currency, followed by Yen and Swiss Franc, reflecting a risk-on sentiment across US and European markets. Kiwi continues to lead gains despite today’s pullback, with Euro and Sterling following suit. Aussie and Loonie are mixed in middle positions.

    Technically, a short term bottom is formed at 0.5540 in NZD/USD, just ahead of 0.5511 (2022 low). More consolidations would be seen with risk of stronger recovery. But as long as 55 D EMA (now at 0.5751) holds, larger down trend is expected to resume through 0.5511/40 sooner rather than later. Nevertheless, strong break of 55 D EMA will bring further rebound to 38.2% retracement of 0.6378 to 0.5540 at 0.5860, as the corrective pattern lengthens.

    ECB’s Knot supports near-term rate cuts, not convinced of of stimulus mode

    Dutch ECB Governing Council member Klaas Knot expressed agreement with market expectations for rate cuts at the January and March meetings, saying he is “pretty comfortable” with them. However, he added it is “too early to comment” on further cuts beyond March.

    “As long as the incoming data is in line with our projected return of inflation to target later this year then I think there is little obstacle to making another rate cut,” Knot said. “To change my mind for next week, it’s rather unlikely.”

    Knot reiterated ECB’s trajectory toward a neutral policy stance. But he emphasized, “I’m not convinced yet that we need to go into stimulative mode as well.”

    He expressed optimism that recent inflation data is “encouraging”. “It confirms the broad picture that we will return to target in the remainder of the year, and hopefully the economy will also finally recover a bit,” he added.

    However, Knot flagged risks posed by US trade policies, describing punitive tariffs as a “clear downside risk on the horizon.”

    New Zealand CPI unchanged at 2.2% yoy, non-tradeable pressures persist

    New Zealand’s CPI rose 0.5% qoq in Q4 2024, in line with expectations, as tradeable inflation increased 0.3% qoq and non-tradeable inflation rose 0.7% qoq. Annually, CPI was unchanged at 2.2% yoy, slightly exceeding the anticipated 2.1% yoy. This marks the second consecutive quarter that inflation has stayed within RBNZ’s target range of 1% to 3%.

    The data highlights diverging trends within inflation components. Non-tradeable inflation, which reflects domestic demand and supply conditions and excludes foreign competition, stood at 4.5% yoy, highlighting persistent internal price pressures. Tradeable inflation, influenced by global factors, recorded a -1.1% yoy decline.

    Rent prices were the largest contributor to the annual CPI increase, rising 4.2% and accounting for nearly 20% of the overall 2.2% gain. Lower petrol prices, down -9.2% yoy, offset some of the upward momentum, with CPI excluding petrol increasing 2.7% yoy.

    Australia’s Westpac Leading Index falls to 0.25%, signals gradual growth pickup

    Westpac Leading Index for Australia dipped slightly in December, moving from 0.33% to 0.25%. Westpac noted that while the growth signal remains modest, it reflects a marked improvement from the consistently negative and below-trend readings observed over the past two years. This uptick hints at a gradual lift in economic momentum through the first half of 2025.

    Westpac forecasts GDP growth to improve steadily over the course of 2025, projecting a year-end expansion of 2.2%—a notable recovery from the weak 0.8% growth recorded in the year to September 2024. However, the bank noted that while this represents progress, it remains below the economy’s long-term potential.

    Westpac highlighted that recent improvements in the Leading Index coincide with mixed signals on broader economy. A key concern for RBA is the labor market, where the “rebalancing” stalled in H2 2024.

    “A further slowdown in underlying measures of inflation could still see the Bank ease in February or April but we suspect the RBA will need to be more comfortable about some of these risks before it is prepared to begin easing,” Westpac noted.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6224; (P) 0.6257; (R1) 0.6305; More…

    Intraday bias in AUD/USD stays neutral for the moment. With 0.6301 resistance intact, consolidations from 0.6130 should be relatively brief, and further decline is expected. Break of 0.6130 will resume the fall from 0.6941. However, firm break of 0.6310 will turn bias back to the upside for stronger rebound to 55 D EMA (now at 0.6352), and possibly above.

    In the bigger picture, down trend from 0.8006 (2021 high) is resuming with break of 0.6169 (2022 low). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806, In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6545) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD CPI Q/Q Q4 0.50% 0.50% 0.60%
    21:45 NZD CPI Y/Y Q4 2.20% 2.10% 2.20%
    00:00 AUD Westpac Leading Index M/M Dec 0.00% 0.10%
    07:00 GBP Public Sector Net Borrowing (GBP) Dec 17.8B 13.7B 11.2B 11.8B
    13:30 CAD Industrial Product Price M/M Dec 0.80% 0.60%
    13:30 CAD Raw Material Price Index Dec 0.40% -0.50%

     



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  • Loonie Weakness Persists in Calmer Markets, AUD/CAD Challenges Key Resistance

    Loonie Weakness Persists in Calmer Markets, AUD/CAD Challenges Key Resistance


    Forex markets have settled into quieter trading as the immediate impact of US President Donald Trump’s inauguration and initial executive orders fades. While Trump’s proposed tariffs remain a significant concern, their delayed implementation suggests a more calculated and strategic approach, tied to future negotiations. This tempered stance has brought a sense of cautious optimism to the markets, as the eventual impact may not be as severe as initially feared—especially if major agreements are reached with key allies like the EU.

    Despite this relative calm, Canadian Dollar remains under significant pressure. As the most immediate target of Trump’s tariff agenda, with measures likely set to take effect on February 1. Loonie’s recovery struggled to gain traction. This weakness has been compounded by softer-than-expected Canadian CPI data for December. While energy prices saw a boost due to base effects, other areas of the economy, such as food and restaurant pricing, contributed to the overall deceleration in inflation. With inflation hovering near the 2% target, BoC is expected to continue easing monetary policy, albeit at a slower pace.

    So far this week, Dollar has been the weakest performer, followed by Loonie and Yen. On the other side of the spectrum, Kiwi leads the gainers, followed by Euro and Sterling. Swiss Franc and Australian Dollar are positioned more neutrally, sitting in the middle of the performance table.

    Technically, AUD/CAD’s rebound extended this week on Loonie’s weakness. It’s now pressing 0.9016 resistance and 55 D EMA. Sustained break there would argue that 0.8851 support was successfully defended, and corrective rally from 0.8562 (2023 low) remains intact. Further rise should then be seen back to retest 0.9375 high.

    In Europe, at the time of writing, FTSE is up 0.09%. DAX is down -0.09%. CAC is up 0.18%. UK 10-year yield is down -0.053 at 4.610. Germany 10-year yield is down -0.011 at 2.518. Earlier in Asia, Nikkei rose 0.32%. Hong Kong HSI rose 0.91%. China Shanghai SSE fell -0.05%. Singapore Strait Times fell -0.33%. Japan 10-year JGB yield fell -0.0073 to 1.190.

    Canada’s Inflation Slows to 1.8% in Dec Amid Food Price Decline

    Canada’s annual inflation rate eased to 1.8% yoy in December, down from 1.9% yoy in November and slightly below expectations of 1.9% yoy. The deceleration was largely driven by declines in food prices and alcohol-related expenses.

    Canadians paid 1.6% less for food purchased from restaurants on a year-over-year basis, marking the first annual decline in this index. Excluding food, CPI rose by 2.1% yoy.

    Gasoline prices, for example, rose 3.5% yoy in December, reversing a -0.5% yoy decline in November. The increase was attributed to a base-year effect, as December 2023 saw a sharp -4.4% monthly decline due to concerns about oil demand amid high supply levels. However, on a month-over-month basis, gasoline prices edged down by -0.6% mom.

    Looking at the core measures, CPI median slowed from 2.6% yoy to 2.4% yoy versus expectation of 2.5% yoy. CPI trimmed slowed from 2.6% yoy to 2.5% yoy, matched expectations. CPI common was unchanged at 2.0% yoy, above expectation 1.9% yoy.

    German ZEW falls to 10.3 as Eurozone shows relative resilience

    German ZEW Economic Sentiment fell sharply in January, dropping from 15.7 to 10.3 and missing market expectations of 15.1. In contrast, Current Situation Index showed slight improvement, rising from -93.1 to -90.4, slightly better than forecasts of -93.0.

    Meanwhile, Eurozone ZEW Economic Sentiment painted a more optimistic picture, climbing from 17.0 to 18.0, exceeding expectations of 16.9. Current Situation Index for the Eurozone also rose, gaining 1.2 points to -53.8.

    ZEW President Achim Wambach attributed the decline in Germany’s sentiment to persistent economic headwinds. He noted, “The second consecutive year of recession caused economic expectations in Germany to fall.”

    Key factors include weak private household spending and low demand in the construction sector. Wambach warned that if these trends persist, “Germany will fall further behind the other countries of the Eurozone.”

    Adding to the challenges, Wambach highlighted growing political uncertainty in Germany due to the complexities of coalition-building and the unpredictability of economic policies under the new Trump administration in the US.

    UK payrolled employment falls -47k in Dec, unemployment rate rises to 4.4% in Nov

    UK payrolled employment fell -47k or -0.2% mom in December. Median monthly pay rose 5.6% yoy, down from 6.4% yoy in November and 7.9% yoy in October. Claimant count rose 0.7k, below expectation of 10.3k.

    In the three months to November, unemployment rate ticked up to 4.4%, above expectation of 4.3%. Average earnings excluding bonus rose 5.6% yoy, up from 5.2% yoy, and above expectation of 5.5% yoy. Average earnings including bonus rose 5.6% yoy, up from 5.2% yoy, matched expectations.

    NZ BNZ services fall to 47.9, contracts for 10th month

    New Zealand’s BNZ Performance of Services Index declined from 49.1 to 47.9 in December, well below historical average of 53.1. This also marks the 10th consecutive month of contraction.

    The breakdown of the data highlights broad weakness: activity/sales fell from 48.3 to 46.2, and supplier deliveries dropped sharply from 52.5 to 47.7. New orders/business remained stagnant at 49.5, just below the threshold for expansion, while employment showed a marginal improvement, rising from 46.7 to 47.4. Stocks/inventories also slipped into contraction territory, falling from 52.0 to 48.8.

    Negative sentiment among respondents increased to 57.5% in December, up from 53.6% in November, with cost-of-living pressures and concerns about the general economic climate dominating feedback.

    BNZ’s Senior Economist Doug Steel remarked, “Comparing across our key trading partners, New Zealand has the only PSI in contraction. Our neighbour Australia is the closest comparison, but their equivalent PSI is sitting more comfortably at 50.8.”

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2211; (P) 1.2278; (R1) 1.2395; More…

    Intraday bias in GBP/USD remains neutral for the moment. Consolidations from 1.2099 could extend with stronger recovery But outlook will remain bearish as long as 12486 support turned resistance holds. On the downside, break of 1.2099 will resume the fall from 1.3433 to 100% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PSI Dec 47.9 49.5
    07:00 GBP Claimant Count Change Dec 0.7K 10.3K 0.3K -25.1K
    07:00 GBP ILO Unemployment Rate (3M) Nov 4.40% 4.30% 4.30%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Nov 5.60% 5.50% 5.20%
    07:00 GBP Average Earnings Including Bonus 3M/Y Nov 5.60% 5.60% 5.20%
    10:00 EUR Germany ZEW Economic Sentiment Jan 10.3 15.1 15.7
    10:00 EUR Germany ZEW Current Situation Jan -90.4 -93 -93.1
    10:00 EUR Eurozone ZEW Economic Sentiment Jan 18 16.9 17
    13:30 CAD CPI M/M Dec -0.40% -0.40% 0.00%
    13:30 CAD CPI Y/Y Dec 1.80% 1.90% 1.90%
    13:30 CAD CPI Median Y/Y Dec 2.40% 2.50% 2.60%
    13:30 CAD CPI Trimmed Y/Y Dec 2.50% 2.50% 2.70% 2.60%
    13:30 CAD CPI Common Y/Y Dec 2.00% 1.90% 2.00%

     



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  • Loonie on a Rollercoaster on Tariff Threats, Canadian CPI Watched

    Loonie on a Rollercoaster on Tariff Threats, Canadian CPI Watched


    Canadian Dollar endured a rough ride, heavily influenced by US President Donald Trump’s tariff rhetoric. The Loonie initially gained some ground yesterday, as Dollar weakened broadly after Trump refrained from imposing immediate tariffs during his first day in office. However, optimism was short-lived as Trump warned of 25% tariffs on both Mexico and Canada starting February 1, citing border security concerns and labeling Canada a “very bad abuser.”

    Trump’s remarks, made during a press briefing accompanying his wave of executive orders, have brought uncertainty back to the already fragile sentiment. In the background, BoC’s latest business outlook survey highlighted apprehension among Canadian businesses. Conducted during November 2024, the survey revealed that 40% of respondents expected negative effects from the new US administration, while one-third were uncertain about the fallout.

    On the horizon, Canada’s December CPI report due today could trigger more volatility in Loonie. Both headline and core inflation are expected to ease further, reinforcing the case for another 25-bps rate cut at BoC’s January 29 meeting. Despite signaling a slower pace of monetary easing this year, BoC appears not ready for a pause yet. At least one more cut is generally expected, especially with inflation hovering near the 2% target.

    Technically for USD/CAD, near term bullishness was revived after yesterday’s huge volatility. For now, further rise is expected as long as 1.4260 support holds. Current rally should continue towards 1.4667 key long term resistance. Nevertheless, a firm break there might not happen until the tariff picture is cleared. For any dip, through 1.4260, the next level of defense would be 55 D EMA (now at 1.4203).

    UK payrolled employment falls -47k in Dec, unemployment rate rises to 4.4% in Nov

    UK payrolled employment fell -47k or -0.2% mom in December. Median monthly pay rose 5.6% yoy, down from 6.4% yoy in November and 7.9% yoy in October. Claimant count rose 0.7k, below expectation of 10.3k.

    In the three months to November, unemployment rate ticked up to 4.4%, above expectation of 4.3%. Average earnings excluding bonus rose 5.6% yoy, up from 5.2% yoy, and above expectation of 5.5% yoy. Average earnings including bonus rose 5.6% yoy, up from 5.2% yoy, matched expectations.

    NZ BNZ services fall to 47.9, contracts for 10th month

    New Zealand’s BNZ Performance of Services Index declined from 49.1 to 47.9 in December, well below historical average of 53.1. This also marks the 10th consecutive month of contraction.

    The breakdown of the data highlights broad weakness: activity/sales fell from 48.3 to 46.2, and supplier deliveries dropped sharply from 52.5 to 47.7. New orders/business remained stagnant at 49.5, just below the threshold for expansion, while employment showed a marginal improvement, rising from 46.7 to 47.4. Stocks/inventories also slipped into contraction territory, falling from 52.0 to 48.8.

    Negative sentiment among respondents increased to 57.5% in December, up from 53.6% in November, with cost-of-living pressures and concerns about the general economic climate dominating feedback.

    BNZ’s Senior Economist Doug Steel remarked, “Comparing across our key trading partners, New Zealand has the only PSI in contraction. Our neighbour Australia is the closest comparison, but their equivalent PSI is sitting more comfortably at 50.8.”

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 155.17; (P) 155.88; (R1) 156.33; More…

    Intraday bias in USD/JPY is back on the downside with breach of 154.97 temporary low. Sustained break of 55 D EMA (now at 154.61) will extend the fall from 158.86 to 38.2% retracement of 139.57 to 158.86 at 151.49 next. Nevertheless, firm break of 156.67 resistance will argue that the pull back has completed, and turn bias back to the upside for retesting 158.86 high instead.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PSI Dec 47.9 49.5
    07:00 GBP Claimant Count Change Dec 0.7K 10.3K 0.3K -25.1K
    07:00 GBP ILO Unemployment Rate (3M) Nov 4.40% 4.30% 4.30%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Nov 5.60% 5.50% 5.20%
    07:00 GBP Average Earnings Including Bonus 3M/Y Nov 5.60% 5.60% 5.20%
    10:00 EUR Germany ZEW Economic Sentiment Jan 15.1 15.7
    10:00 EUR Germany ZEW Current Situation Jan -93 -93.1
    10:00 EUR Eurozone ZEW Economic Sentiment Jan 16.9 17
    13:30 CAD CPI M/M Dec -0.70% 0.00%
    13:30 CAD CPI Y/Y Dec 1.70% 1.90%
    13:30 CAD CPI Median Y/Y Dec 2.50% 2.60%
    13:30 CAD CPI Trimmed Y/Y Dec 2.50% 2.70%
    13:30 CAD CPI Common Y/Y Dec 1.90% 2.00%

     



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  • Greenback Eases Ahead of Trump’s Executive Actions, Bitcoin Takes Leads and Hits New Record

    Greenback Eases Ahead of Trump’s Executive Actions, Bitcoin Takes Leads and Hits New Record


    Dollar is trading slightly lower today as markets await Donald Trump’s inauguration as the 47th US President. Attention is focused on his inaugural speech, expected to confirm his policy priorities. However, the real market-moving event is likely to be the series of executive actions Trump has promised to enact immediately.

    Over 200 directives are anticipated, including legally binding executive orders and proclamations, with particular interest in measures affecting tariffs and deregulations in sectors like energy and cryptocurrencies.

    One key area of focus is Trump’s potential tariff policies, which would surely reshape US trade relationships with allies and adversaries and impact global market. Deregulation efforts, spanning traditional energy sectors to the fast-growing cryptocurrency industry, are also expected to influence investor sentiment.

    Meanwhile, Bitcoin has reached a new all-time high, reflecting the renewed bullish sentiment in cryptocurrencies. Technically, next near term target is 61.8% projection of 49008 to 108368 from 89127 at 125812. Outlook will stay bullish as long as 89127 support holds, even in case of pull back.

    While Trump’s inauguration and executive actions are dominating headlines, global markets are also preparing for several other key events. BoJ is widely expected to raise its policy rate. UK employment data will provide insight into the labor market’s response to the Autumn Budget. Inflation data from Canada and New Zealand will help shape monetary policy projections of BoC and RBNZ. PMI data from major economies will round out the week’s events.

    ECB’s Holzmann: January rate cut not as certain with elevated inflation risks

    Austrian ECB Governing Council member Robert Holzmann expressed skepticism over a potential rate cut at ECB’s upcoming January meeting. In an interview with Politico, Holzmann stated, “A cut is not a foregone conclusion for me at all,” emphasizing his commitment to approaching the discussion with an “open mind.”

    Holzmann highlighted that ECB decisions are fundamentally data-driven and noted that inflation remained “well above” 2% in December, with January figures expected to reflect similar levels. He cautioned that “cutting interest rates when inflation rises faster than anticipated, even temporarily, risks hurting credibility.”

    As a known policy hawk, Holzmann also revealed increased doubts about inflation settling around ECB’s 2% target by the end of the year. He cited unexpected developments since the December decision, including faster-than-expected depletion of gas reserves due to colder weather, the effective closure of the Ukraine gas transit, and the risks of persistently high energy prices.

    China maintains LPR as offshore Yuan recovers ahead of key support

    China’s central bank maintained its benchmark lending rates unchanged on Monday. The one-year loan prime rate was steady at 3.1%, while the over-five-year LPR, which influences mortgage rates, remained at 3.6%.

    The offshore Yuan strengthened notably against the Dollar, continuing to draw support from a a key long-term level. This comes despite market speculation that China might allow Yuan to weaken further to counteract the economic effects of new tariffs introduced under Donald Trump’s presidency.

    A weaker currency would bolster export competitiveness by making Chinese goods more affordable internationally. However, Beijing faces a dilemma: while a controlled depreciation could help exporters, an uncontrolled fall could lead to heightened volatility in domestic financial markets and reduced investor confidence.

    Acknowledging these risks, PBOC Governor Pan Gongsheng reaffirmed the central bank’s commitment to exchange rate stability last week, stating, “We will resolutely prevent the risk of the exchange rate overshooting, ensuring that the Yuan exchange rate remains generally stable at a reasonable, balanced level.”

    Technically, a short term top should be confirmed at 7.3694 in USD/CNH with today’s dip. But it’s early to call for bearish reversal as long as 55 D EMA (now at 7.2797) hits. Further rally remains in favor through 7.3745 (202 high) to resume the long term up trend.

    Nevertheless, firm break of 55 D EMA should bring deeper pull back to 38.2% retracement of 6.9709 to 7.3694 at 7.2172, which is close to 55 W EMA (now at 7.2097) even just as a correction to rise from 6.9709.

    From BoJ to inflation data and PMIs, global markets have more to focus on than Trump

    While the inauguration of Donald Trump dominates the headlines in US markets, global investors are turning their attention to a week packed with pivotal high-impact economic events that would provide crucial clues about the monetary policy paths of key economies.

    BoJ’s upcoming meeting is a top priority for global markets. After repeated signals from Governor Kazuo Ueda and other top officials, markets should be well-prepared for a 25bps rate hike, raising the policy rate to 0.50%. However, beyond the rate decision, the focus will shift to BoJ’s updated economic projections and policy guidance.

    While Ueda is expected to remain cautious about committing to a specific timeline for normalization, he may strike a more optimistic tone regarding wage growth, based on reports from branch managers. Additionally, BoJ could raise inflation forecasts in its quarterly outlook, both of which would add hawkish tones to the meeting.

    In the UK, attention is squarely on employment data, which will shed light on the labor market’s response to the government’s Autumn Budget. The markets are already pricing in over 75 basis points of BoE rate cuts in 2025. Meanwhile, IMF is projecting an even deeper 100bps reduction. The strength of the labor market will play a pivotal role in determining the scale of monetary easing this year, making this release a key driver for Sterling sentiment.

    Inflation data from Canada and New Zealand also hold significant importance. In Canada, BoC has indicated that the pace of rate reductions will slow, but uncertainty remains over the timing of pauses. A Reuters poll suggests an 80% chance of a 25bps cut on January 29, following December’s larger 50-bps move. CPI data will either reinforce or challenge this expectation.

    Meanwhile, New Zealand’s Q4 inflation report is expected to show further easing in price pressures, consistent with RBNZ’s forecasts. If the trend persists, RBNZ could deliver another 50bs rate cut at its February meeting

    Other data to watch this week include Germany’s ZEW Economic Sentiment Index and PMI reports from several major economies. These releases will provide additional context on global economic momentum and inform central bank decisions in the months ahead.

    Here are some highlights for the week:

    • Monday: Japan machine orders, tertiary industry index; Germany PPI; Swiss PPI; BoC business outlook survey.
    • Tuesday: New Zealand BNZ services; UK employment; Germany ZEW economic sentiment; Canada CPI.
    • Wednesday: New Zealand CPI; UK public sector net borrowing: Canada IPPI and RMPI.
    • Thursday: Japan trade balance; Canada retail sales; US jobless claims.
    • Friday: Australia PMIs; Japan CPI, PMIs, BoJ rate decision; Eurozone PMIs; UK PMIs; Canada new housing price index; US PMIs, US existing sales.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0247; (P) 1.0289; (R1) 1.0313; More…

    EUR/USD recovers mildly today but stays in the middle of near term range above 1.0176. Intraday bias stays neutral and outlook remains bearish with 1.0435 resistance intact. On the downside, break of 1.0176 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. However, firm break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Machinery Orders M/M Nov 3.40% -0.70% 2.10%
    00:01 GBP Rightmove House Price Index M/M Jan 1.70% -1.70%
    01:00 CNY 1-y Loan Prime Rate 3.10% 3.10% 3.10%
    01:00 CNY 5-y Loan Prime Rate 3.60% 3.60% 3.60%
    04:30 JPY Tertiary Industry Index M/M Nov -0.30% 0.10% 0.30% 0.10%
    04:30 JPY Industrial Production M/M Nov F -2.20% -2.30% -2.30%
    07:00 EUR Germany PPI M/M Dec -0.10% 0.30% 0.50%
    07:00 EUR Germany PPI Y/Y Dec 0.80% 1.10% 0.10%
    07:30 CHF PPI M/M Dec 0.00% 0.20% -0.60%
    07:30 CHF PPI Y/Y Dec -0.90% -1.50%
    15:30 CAD BoC Business Outlook Survey

     



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  • Commodity Currencies Slide as Markets Brace for Trump’s Tariff Moves

    Commodity Currencies Slide as Markets Brace for Trump’s Tariff Moves


    Sharp selloff in commodity currencies against Dollar is dominating market action as the US session unfolds. While broader trading remains subdued, the sudden weakness in these currencies appears tied to trader caution ahead of President-elect Donald Trump’s inauguration on Monday. Concerns over tariff policies could be the main driver of the moves, in the absence of other clear fundamental catalysts.

    Canada, Mexico, and China are widely speculated to be high on Trump’s tariff agenda. The tariffs may serve as leverage to address issues like fentanyl exports or re-exports impacting the United States.

    However, the specifics of Trump’s strategy remain a “wild card.” Possible scenarios include blanket tariffs on major trading partners, sector-specific measures, immediate enactment via executive orders, or staggered monthly increases. Or, it could be a mix of these approaches.

    For the week, Sterling remains the weakest performer, followed by Loonie and Dollar. On the other hand, Japanese Yen leads gains with the Aussie and Swiss Franc rounding out the top three. Kiwi and Euro are trading in mixed positions. However, the current selling pressure on commodity currencies could alter these rankings as the week comes to the close.

    ECB’s Nagel: Should avoid rushing monetary policy normalization

    German ECB Governing Council member Joachim Nagel in an interview with Platow Brief, highlighted persistent services inflation and a “high level of uncertainty,” referencing concerns about global trade dynamics as Donald Trump prepares to return to the White House next week.

    “We should therefore not rush into anything on the path to monetary policy normalization,” Nagel stated.

    Meanwhile, he defended the ECB’s discussions of a more aggressive 50-basis-point rate cut during its December meeting, noting that such debates are a normal part of policy deliberations.

    ECB’s Elderson: Rate setting is a question of speed and magnitude

    ECB Executive Board member Frank Elderson emphasized the delicate balance the central bank must strike in setting interest rates during an interview with Het Financieele Dagblad.

    He warned, “If we lower the interest rate too quickly, dialling down services inflation sufficiently could become complicated.” At the same time, he acknowledged the risks of maintaining rates too high for too long, which could lead to undershooting ECB’s inflation target.

    “The markets don’t think we’ve finished easing now that we’re at 3% and I don’t think we have, either,” he added. “Setting interest rates is ultimately a question of how fast and how much.”

    Eurozone CPI finalized at 2.4% in Dec, core CPI at 2.7%

    Eurozone inflation was finalized at to 2.4% yoy in December, up from November’s 2.2% yoy. Core CPI, which excludes energy, food, alcohol, and tobacco, held steady at 2.7% yoy. Services made the largest contribution to the annual headline inflation rate (+1.78 percentage points), followed by food, alcohol, and tobacco (+0.51 pp), non-energy industrial goods (+0.13 pp), and energy (+0.01 pp).

    In the broader EU, inflation was finalized at 2.7% yoy, up from 2.5% yoy in November. Ireland recorded the lowest annual inflation rate at 1.0%, followed by Italy at 1.4%, with Luxembourg, Finland, and Sweden at 1.6% each. On the other end, Romania (5.5%), Hungary (4.8%), and Croatia (4.5%) posted the highest inflation rates.

    Across the EU, annual inflation rose in 19 member states, remained unchanged in one, and fell in seven compared to the previous month.

    UK retail sales fall -0.3% mom in Dec, down -0.8% qoq in Q4

    UK retail sales volumes declined by -0.3% mom in December, significantly missing expectations for 0.4% mom increase. The drop was primarily driven by reduced supermarket sales, partially offset by a rebound in non-food stores such as clothing retailers, which saw recovery after recent declines.

    On a quarterly basis, sales volumes in Q4 fell -0.8% qoq compared with Q3, highlighting a slowdown in consumer activity. However, year-on-year, Q4 sales volumes rose 1.9% compared to the same period in 2023.

    China’s Q4 GDP growth surpasses expectations, full-year growth hits 5% target

    China’s economy ended 2024 on a strong note, with GDP expanding by 5.4% yoy in Q4, beating market expectations of 5.0%. This marked a significant acceleration from 4.6% in Q3, 4.7% in Q2, and 5.3% in Q1. The robust Q4 performance pushed full-year GDP growth to 5.0%, aligning with the government’s target of “around 5%.”

    December’s economic indicators also showed positive momentum. Industrial production surged 6.2% yoy, exceeding the forecast of 5.4%. Retail sales grew by 3.7% yoy, marginally beating expectations of 3.5%. However, fixed asset investment lagged, rising only 3.2% year-to-date, just below the 3.3% forecast.

    Despite the upbeat data, concerns remain. Statistics Bureau spokesperson Fu Linghui acknowledged lingering weakness in consumer spending and cautioned that in 2025, the “unfavorable impact of external factors may deepen.”

    BNZ PMI at 45.9: NZ manufacturing completes 2024 fully in contraction

    New Zealand’s BNZ Performance of Manufacturing Index rose marginally in December, increasing from 45.2 to 45.9. While this marks a slight improvement, the sector remains in a prolonged contraction, far below the long-term average of 52.5 since the survey’s inception. December also marked the 22nd consecutive month of contraction, a record-breaking trend for the PMI.

    Catherine Beard, Director of Advocacy at BusinessNZ, noted that 2024 was unprecedented, as it was the first year in the survey’s history with all 12 months in contraction. By comparison, the next closest period was 2008 during the Global Financial Crisis, which saw nine months of contraction.

    Breaking down the December data, production dropped further, slipping from 42.3 to 41.9. Employment showed modest improvement, rising from 46.9 to 47.6, while new orders also edged up from 44.5 to 46.5. However, finished stocks fell significantly, declining from 49.2 to 45.9, and deliveries dipped slightly below the neutral 50 mark, moving from 50.0 to 49.8.

    USD/CAD Mid-Day Outlook

    Daily Pivots: (S1) 1.4336; (P) 1.4370; (R1) 1.4427; More…

    Immediate focus is now on 1.4466 resistance with current strong rally ins USD/CAD. Decisive break there will resume larger up trend to 1.4667/89 long term resistance zone. On the downside, break of 1.4279 support will bring deeper correction. But downside should be contained by 55 D EMA (now at 1.4187) to bring rebound.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PMI Dec 45.9 45.5
    02:00 CNY GDP Y/Y Q4 5.40% 5.00% 4.60%
    02:00 CNY Industrial Production Y/Y Dec 6.20% 5.40% 5.40%
    02:00 CNY Retail Sales Y/Y Dec 3.70% 3.50% 3.00%
    02:00 CNY Fixed Asset Investment (YTD) Y/Y Dec 3.20% 3.30% 3.30%
    07:00 GBP Retail Sales M/M Dec -0.30% 0.40% 0.20% 0.10%
    09:00 EUR Current Account (EUR) Nov 27.0B 28.0B 25.8B 30.2B
    10:00 EUR Eurozone CPI Y/Y Dec F 2.40% 2.40% 2.40%
    10:00 EUR Eurozone CPI Core Y/Y Dec F 2.70% 2.70% 2.70%
    13:30 USD Building Permits Dec 1.48M 1.46M 1.49M
    13:30 USD Housing Starts Dec 1.50M 1.32M 1.29M
    14:15 USD Industrial Production M/M Dec 0.90% 0.30% -0.10% 0.20%
    14:15 USD Capacity Utilization Dec 77.60% 77.10% 76.80% 77.00%

     



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  • New Zealand Building Permits Rebound In November

    New Zealand Building Permits Rebound In November


    The number of building consents issued in New Zealand was up a seasonally adjusted 5.3 percent on month in November, Statistics New Zealand said on Monday – erasing the 5.2 percent decline in October.

    In November, there were 3,100 new dwellings consented, including 1,437 townhouses, flats, and units; 1,402 stand-alone houses; 186 apartments; and 75 retirement village units.

    In the year ended November 2024, the actual number of new dwellings consented was 33,609, down 12 percent from the year ended November 2023.

    The annual value of non-residential building work consented was NZ$9.4 billion, down 1.6 percent from the year ended November 2023.

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