FX market outlook

FX market outlook

Posted on Wednesday, December 20 2017 at 10:02 am GMT+0000

US tax bill to be ratified; Japanese equities at multi-decade high

Here are the latest developments in global markets:

·         FOREX: The dollar was not much changed versus a basket of currencies as markets awaited the House of Representatives to cast a final vote in favor of tax reforms later today. The euro was roughly flat after receiving a lift from higher German bond yields.

·         STOCKS: The Nikkei 225 closed 0.1% higher and the Topix added 0.3% to finish at its highest since late 1991. The Hang Seng was down by 0.1%. Euro Stoxx 50 futures traded 0.1% up at 0727 GMT, with contracts on the Dow, S&P 500 and Nasdaq 100 all being up by 0.2%.

·         COMMODITIES: Tuesday’s API report showing an unexpected decline in US crude stockpiles supported oil prices. WTI and Brent crude were both higher by 0.3%, at $57.74 and $63.97 per barrel respectively. Gold traded up by 0.1% at $1263.61 an ounce, around two-week high levels.

Major movers: Little movement as US House set to cast final vote on tax bill

The dollar index was 0.1% up at 93.52 49 after retreating the two previous days, with expectations that congress would today ratify tax reforms providing some support to the US currency. Both the House and Senate approved the tax bill though due to procedural issues the former would need to revote later in the day. Interestingly, the greenback didn’t get much of a boost from long-term Treasure yields rising to their highest in nearly two months.

Dollar/yen was 0.1% higher, trading at the 113 handle and not far below a one-week high hit earlier in the day. The Bank of Japan will tomorrow be completing its two-day meeting on monetary policy.

Euro/dollar was little changed after being boosted by an increase in German bond yields following the eurozone’s largest economy revealing plans to issue more 30-year bonds over the coming year. The pair traded at 1.1836.

Pound/dollar was up by less than 0.1% at 1.3389, while the antipodeans which posted hefty gains relative to the greenback in the week that preceded, were both down, though not by much. Aussie/dollar was at 0.7662 and kiwi/dollar traded at 0.6970.

Day ahead: House Republicans back to vote on taxes; New Zealand GDP growth expected to slow

The US tax story will remain among the top headlines on Wednesday after the House of Representatives approved the bill on Tuesday but procedural issues render it necessary for the House to vote for a second time today.

Meanwhile, the National Association of Realtors will release data on US existing home sales at 1500 GMT and the Energy Information Administration (EIA) will publish weekly readings on US crude oil stocks at 1530 GMT.

According to forecasts, residential buildings sold in the previous month are expected to inch up by 0.06 million to 5.54 million in November, with the monthly percentage change tumbling to 0.9% from the 2.0% seen in October.

Looking at the EIA report, US crude inventories and distillate stocks are said to continue falling but at a slower pace in the week ending December 15. However, gasoline inventories are anticipated to rise for the sixth consecutive week.

In Canada, October’s wholesale sales will be available at 1330 GMT. After a deep fall of 1.2% in September, the measure is now expected to increase by 0.5% m/m.

Elsewhere, New Zealand will reveal GDP growth figures for the third quarter at 2145 GMT, with analysts projecting the economy to expand by 2.3% y/y compared to 2.5% in the previous quarter. On a quarterly basis GDP growth is anticipated to slow down by 0.3 percentage points relative to the previous quarter to 0.5%.

Regarding central bankers making appearances, the BOE chief, Mark Carney is scheduled to discuss on the November’s financial stability report at 1315 GMT.

The Swedish central bank will hold a press conference unveiling it decision on interest rates at 0830 GMT.