Forex-novosti i prognoze od 07-01-2020

Data released today revealed the U.S. trade deficit narrowed to $43.8 bln in November. Analysts at Wells Fargo note that net exports are going to provide a larger boost to Q4 growth than what they initially expected.

• "Net exports should boost Q4 GDP, but if, as we expect, the recent decline in imports is due to importers pulling forward demand to get ahead of consumer-focused tariffs, it may be set to reverse and be a drag on GDP in coming quarters.
• Total exports rose 0.7%, and November marked the third consecutive month that U.S. crude oil exports exceeded imports-a significant shift. American production of crude oil has mushroomed over the past decade, and a sustained gain in prices, stemming from rising tensions in the Middle East, could stimulate further investment. Higher oil prices, therefore, are unlikely to have a crippling effect on the U.S. economy today."

The Ivey Business School Purchasing Managers Index (PMI), measuring Canada's economic activity, fell to 51.9 in December from an unrevised 60.0 in November.

Economists had expected the gauge to hit 53.8.

A figure above 50 shows an increase while below 50 shows a decrease.

Within sub-indexes, the inventories indicator dropped to 52.5 in December from 59.1 in the prior month, while the supplier deliveries gauge decreased to 49.3 from 52.7. At the same time, the prices index climbed to 59.5 in December from 54.9 in November and the employment measure rose to 51.4 from 50.3.

The U.S. Commerce Department reported on Tuesday that the value of new factory orders fell 0.7 percent m-o-m in November, following a revised 0.2 percent m-o-m gain in October (originally a 0.3 percent m-o-m advance).

Economists had forecast a 0.8 percent m-o-m decline.

According to the report, orders for transportation equipment tumbled 5.9 percent m-o-m in November after being unchanged m-o-m in October. Machinery orders decreased 1.2 percent m-o-m after gaining 0.8 percent m-o-m in October. Meanwhile, orders for electrical equipment, appliances and components rose 2.0 percent m-o-m.

Total factory orders excluding transportation, a volatile part of the overall reading, increased 0.3 percent m-o-m in November (compared to an upwardly revised 0.3 percent m-o-m growth in October), while orders for nondefense capital goods excluding aircraft, a measure of business spending plans, rose 0.2 percent m-o-m (instead of gaining 0.1 percent m-o-m as reported last month). The report also showed that shipments of core capital goods fell 0.3 percent m-o-m in November, the same as previously reported.

In y-o-y terms, factory orders decreased 0.7 percent in November.

The Institute for Supply Management (ISM) reported on Tuesday its non-manufacturing index (NMI) came in at 55.0 in December, which was 1.1 percentage points higher than the November reading of 53.9 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate.

Economists forecast the index to increase to 54.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 11 reported growth last month, the ISM said, adding that the respondents are positive about the potential resolution on tariffs.

According to the report, the ISM's non-manufacturing business activity measure increased to 57.2 percent, 5.6 percentage points higher than the November reading of 51.6 percent. That reflected growth for the 125th consecutive month, at a faster rate in December. Meanwhile, the New orders gauge decreased to 54.9 percent, down 2.2 percentage points from the reading of 57.1 percent in November. The Employment indicator fell 0.3 percentage point in December to 55.2 percent from the November reading of 55.5 percent. The Prices Index reading of 58.5 percent was the same as the November figure, indicating that prices increased in December for the 31st consecutive month.

Lee Sue Ann, an economist at UOB Group, thinks the Bank of Japan (BoJ) will most likely keep its monetary policy unchanged at its January meeting.

• "The BoJ, in December 2019, kept its monetary policy stance, policy rate and asset purchase targets all unchanged as widely expected. We believe continued forward guidance without action will be insufficient, and with economic data turning south, the BoJ will eventually need to act. We expect the BoJ to renew easing monetary policy via deepening its negative policy call rate to -0.2% possibly in the later part of 1Q20 (from -0.1% presently).

U.S. stock-index futures were flat on Tuesday, following Monday's rebound trade, amid a lack of fresh escalation in the standoff between the U.S. and Iran and an understanding that this conflict still provides some uncertainty.

Global Stocks:

Analysts at Rabobank note the latest CFTC's data revealed the USD net longs are consolidating, having hit their lowest levels since mid-June in the middle of December.

• "Net EUR short positions have risen to their highest levels since October.
• Net GBP positions have held in positive ground for two consecutive weeks. This is the longest run for GBP net longs since mid-2018.
• JPY net positions have held in negative ground for twelve consecutive weeks.
• CHF net shorts fell back in December. The surge in demand for safe-haven assets in early January suggests increased demand for the CHF in the next set of data.
• CAD net long positions recovered a little ground into the end of last year.
• AUD net shorts dropped into late December. News of a China/US phase 1 trade deal was supportive."

(company / ticker / price / change ($/%) / volume)

Statistics Canada announced on Tuesday that Canada's merchandise trade deficit stood at CAD1.09 billion in November, narrowing from a revised CAD1.61 billion gap in October (originally a CAD1.08-billion gap). That was the smallest trade gap since June 2019.

Economists had expected a deficit of CAD1.15 billion.

According to the report, the country's exports fell 1.4 percent m-o-m in November, driven by a decline in exports of energy products (-7.4 percent m-o-m). Meanwhile, imports decreased 2.4 percent m-o-m in November, led by a drop in imports of aircraft and other transportation equipment and parts (-13.8 percent m-o-m).

Boeing (BA) initiated with an Underperform at Longbow; target $300

Merck (MRK) initiated with a Sector Perform at RBC Capital Mkts; target $99

Pfizer (PFE) initiated with an Outperform at RBC Capital Mkts; target $46

Bank of America (BAC) downgraded to Neutral from Buy at UBS; target raised to $36

JPMorgan Chase (JPM) downgraded to Neutral from Buy at UBS; target raised to $138

Chevron (CVX) downgraded to Underperform from Neutral at BofA/Merrill

The U.S. Commerce Department reported on Tuesday that U.S. the goods and services trade deficit narrowed to $43.1 billion in November from a revised $46.9 billion in the previous month (originally a gap of $47.2). This represented the lowest trade gap since October of 2016.

Economists had expected a deficit of $43.8 billion.

According to the report, the November decline in the goods and services deficit reflected a decrease in the goods deficit of $3.9 billion to $63.9 billion and a drop in the services surplus of less than $0.1 billion to $20.8 billion.

Exports of goods and services from the U.S. rose 0.7 percent m-o-m to $208.6 billion in November, while imports fell 1.0 percent m-o-m to $251.7 billion.

Year-to-date, the goods and services deficit declined 0.7 percent from the same period in 2018. Exports reduced less than 0.1 percent, while imports edged down 0.1 percent.

Jacqui Douglas, the chief European macro strategist at TD Securities, notes that the December estimate of Eurozone inflation showed headline ticking up to 1.3% YoY on higher energy prices, and core CPI holding steady at 1.3% YoY.

• "Recent trends in core CPI have been unusually strong, with the 3m annuazed trend jumping to 1.7%. Core goods inflation has picked up a touch, but services CPI, outside of one-off jumps in travel costs or methodology changes, is posting its strongest gains in about 7 years. Meanwhile, the ECB's alternate underlying inflation measures (which we only have up until November) have been fairly flat for the last half-year.
• We believe it's too early to call this a change in trend. But it will leave the ECB feeling more comfortable about inflation prospects and the current amount of stimulus in place.
• However, with the ECB forecasting HICP of only 1.6% in 2022, we think it's far too early to start thinking about rate hikes or even the end of QE. That being said, if M/M core CPI trends don't show any signs of unwind in the next 1-2 months, that would make for a more convincing upward trend. This would likely see the ECB remain on hold in March, rather than our forecast for a 10bps rate cut."
  
  

FX strategists at UOB Group suggest that in light of the recent price action in USD/JPY a breakdown of the 107.00 looks quite difficult in the short-term horizon.

• "24-hour view: While our view that the 'next support at 107.50 is unlikely to come under threat' was not wrong, the swift and sharp recovery in USD from a low of 107.75 came as a surprise. The rebound appears to running ahead of itself but with no sign of easing just yet, USD could edge above the overnight high of 108.50. However, the next resistance at 108.85 is not expected to come into the picture. Support is at 108.15 followed by 107.95.
• Next 1-3 weeks: We held the view last Thursday (02 Jan, spot at 108.70) that USD is 'expected to trade with a downward bias but the November's low of 107.87 could be out of reach'. While our view for USD to move lower was not wrong, the sudden and sharp pick-up in momentum was unexpected as USD plunged to a low of 107.82 on Friday. The rapid decline appears to be running ahead of itself but with no sign of stabilization, USD could continue to weaken from here. At this stage, the prospect of a break of the major 107.00 support is not high. On the upside, only a move above 108.85 would indicate that the current weakness has stabilized."

Analysts at TD Securities are expecting Canada's international trade deficit to hold stable at $1.1bn in November.

• "Auto exports will benefit from normalized production levels south of the border, but we do not anticipate a full rebound given the scheduled wind down of GM's Oshawa facility. Elsewhere, pipeline shutdowns will offset the impact of higher oil prices while the CN rail strike will provide another headwind to exports."

FX strategists at UOB Group suggest that ongoing correction in NZD/USD could extend to the area below the 0.6600-handle.

• "24-hour view: Expectation for NZD to 'test 0.6630 first before stabilizing' did not materialize as it traded in a quiet manner between 0.6645 and 0.6680. Downward pressure has dissipated and the current movement is viewed as an on-going consolidation phase. In other words, NZD is expected to trade sideways for today, albeit likely at a higher range of 0.6650/0.6690.
• Next 1-3 weeks: We highlighted last Thursday (02 Jan, spot at 0.6730) that while momentum is still strong, 'severely overbought conditions suggest 0.6790 could be out of reach'. However, the subsequent sharp and swift sell-off that sent NZD plummeting below the 'strong support' at 0.6670 was not exactly expected (NZD dropped to 0.6645 last Friday). The more than one-month-long rally in NZD has likely run its course and last Tuesday's (31 Dec) peak of 0.6755 is deemed as a short-term top and this level may not come into picture for a period. To look at it another way, the current movement is likely the early stages of a pullback and in view the prior strong rally, the size of the pullback could be considerable. All in, NZD is expected to stay on the back-foot from here unless it can move and stay above 0.6730. On the downside, a test of 0.6590 would not be surprising."

Analysts at Nordea Markets note that Eurozone's core inflation remained unchanged at 1.3% YoY in December, while headline inflation came at 1.3% YoY in December, up from 1.0% YoY in November.

• "Energy prices pushed headline inflation higher in December, contributing with almost 0.4% points more in December compared with November.
• Core inflation remained unchanged as both core goods and core services remained roughly unchanged. German package holiday prices did put upward pressure on core services prices in December, and from that perspective, today's numbers are perhaps slightly disappointing.
• The ECB is likely to be unaffected by today's numbers. On the one hand, 1.3% core is higher than it has been for a quite some time and momentum is building gradually. But, on the other hand, core inflation is likely to be lower already next month and activity indicators are probably more important until the risks of a deeper downturn have diminished.
• In sum, today's numbers are likely to keep the ECB in a wait-and-see mode."

Analysts at TD Securities notes that the U.S. non-manufacturing ISM index report for December took on increased importance after the manufacturing index was unexpectedly reported down on Friday.

• "We expect a more positive tone in the non-manufacturing report, with the main index up one point to 54.9. It tends to be more sensitive to sentiment swings than the manufacturing index, and the equity market was up, helped by the Phase One deal announcement."

FX strategists at UOB Group expect the GBP/USD to stick to the current rangebound theme for the time being.

• "24-hour view: Our expectation for GBP to move lower yesterday was incorrect as it staged a surprising robust and rapid recovery to an overnight high of 1.3174. The rebound appears to be running ahead and while GBP could edge upwards from here, any advance is viewed as a higher trading range of 1.3140/1.3200 (a sustained rise above 1.3200 appears unlikely).
• Next 1-3 weeks: We highlighted yesterday (06 Jan, spot at 1.3085) that GBP is 'still trading sideways but risk of a break of bottom of expected 1.3000/1.3400 range has increased'. We added, GBP 'has to move and stay above 1.3190 or the current mild downward pressure would increase quickly'. GBP subsequently recouped all of its Friday's loss and touched a high of 1.3174. While downward pressure has eased somewhat, GBP has to register a NY closing above 1.3190 or risk of further weakness remains intact. That said, after yesterday's price action, it appears likely that GBP could trade between the two major levels of 1.3000 and 1.3400 for a period."

Philippe Dauba-Pantanacce, senior economist at Standard Chartered, suggests that this year's US electoral heatmap includes fewer noteworthy ballots than in previous years.

"The November US election has important global implications and is the only one we place in our 'high-stakes' category. We define 'high-stakes' elections as those having an uncertain outcome, significant political (and in some cases geopolitical) implications, and the potential to move markets. The global systemic role of the US, the weight of Trump's personal decisions in foreign policy and trade, and the uncertainty of the outcome combine to make the US election the most important on our 2020 calendar by far. Elsewhere, elections in Taiwan, Iran and Israel may have significant regional repercussions. In Sub-Saharan Africa, elections in Côte d'Ivoire, Cameroon and Ethiopia will be important for emerging-market (EM) investors."

China's foreign-exchange reserves rose to a six-month high at the end of December, as the yuan rebounded against the U.S. dollar, official data showed.

People's Bank of China said the country's hoard of foreign exchange increased $12.3 billion from a month earlier to $3.108 trillion in December, reversing a $9.6 billion drop in November. December's increase was slightly smaller than a median forecast for a $14 billion rise.

The U.S. dollar index fell due to global trade conditions, major central banks' policy moves and the U.K. election, offsetting some effects from weaker bond prices, the State Administration of Foreign Exchange said in a statement after the data was released.

According to the report from Eurostat, in November 2019 compared with October 2019, the seasonally adjusted volume of retail trade increased by 1.0% in the euro area (EA19) and by 0.6% in the EU28. Economists had expected a 0.6% increase in the euro area. In October 2019, the retail trade volume decreased by 0.3% in the euro area and by 0.2% in the EU28.

In November 2019 compared with November 2018, the calendar adjusted retail sales index increased by 2.2% in the euro area and by 1.9% in the EU28. Economists had expected a 1.3% increase in the euro area

In the euro area in November 2019, compared with October 2019, the volume of retail trade increased by 1.4% for non-food products and by 0.7% for food, drinks and tobacco, while automotive fuels decreased by 1.0%. In the EU28, the volume of retail trade increased by 0.9% for non-food products and by 0.5% for food, drinks and tobacco while automotive fuels decreased by 0.8%.

Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Poland (+3.3%), Belgium (+2.7%) and Latvia (+2.6%). The largest decreases were observed in the United Kingdom (-1.7%), Ireland (-0.9%) and Finland (-0.5%).

According to a flash estimate from Eurostat, euro area annual inflation is expected to be 1.3% in December 2019, up from 1.0% in November.

Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in December (2.0%, compared with 1.9% in November), followed by services (1.8%, compared with 1.9% in November), non-energy industrial goods (0.4%, stable compared with November) and energy (0.2%, compared with -3.2% in November).

Meanwhile, the core figure arrived at +1.3% in the reported month when compared to +1.3% expectations and +1.3% previous.

China's surging consumer inflation will rise further on the current oil spike, but the jump won't last long and probably won't affect the pace of monetary easing in 2020, according to Citigroup Inc.

Consumer inflation in China will hit 5% in January as higher oil prices combined with a low base from 2019 drive up the cost of vehicle fuel, petrochemicals and other by products such as plastic packaging, Yu Xiangrong, a Hong Kong-based Citigroup economist, wrote in a note.

He also said producer prices are more likely to turn positive in the month, as China relies heavily on foreign supplies for oil and more expensive imports pass through to downstream sectors.

Yet, the surge caused by supply shocks won't last long since there's still a possibility that Iran and the U.S. could find common cause in a new agreement, Yu said. The central bank will "keep its easing bias to contain downside risks in 2020," he said.

CIBC Research discusses CHF outlook and looks for the currency to remain contained in the near-term. CIBC targets EUR/CHF at 1.09 in Q1 and at 1.11 in Q3.

"For twenty months now, the realized volatility for USD/CHF has been negligible. Moreover, the pair has essentially been oscillating around par for the better part of the last four years. That sleepy trend for CHF looks likely to continue. In terms of the endogenous backdrop, the SNB appears to be far from shifting policy. In its last meeting, the Bank noted that its negative policy rate is offsetting the upward impact of its current account on the CHF. But in addition, prolonged low rates are also having an effect on Switzerland's mortgage and real estate markets," CIBC adds.

The latest PMI data pointed to the fastest increase in eurozone construction activity for eight months in December. Growth was supported by another rise in new orders and a further workforce expansion. Similarly, input buying increased at a quicker rate and supplier delivery times lengthened amid elevated demand. Meanwhile, input prices rose at the softest rate for over three years.

Up from 50.6 in November, at 51.3 in December, the IHS Markit Eurozone Construction PMI pointed to a faster expansion in construction activity across the currency area. In fact, the latest rise was the quickest for eight months amid accelerated growth in both Germany and France. Across the euro area's three largest economies, only Italy registered a reduction in construction activity.

At the sub-sector level, faster growth was primarily driven by home building, where the rate of activity expansion was the fastest since May. The rise in total activity was also supported by a fractional increase in commercial sub-sector. Meanwhile, work undertaken on infrastructure projects continued to fall, with the rate of decline little changed from October and solid overall. A key factor behind the increase in total construction activity was a further rise in new orders in the final month of 2019. Moreover, the rate of growth was the quickest since last February and historically marked.

Finally, sentiment towards the one-year business outlook was neutral in December. National data suggested that pessimism in Germany was offset by confidence in France and Italy

Deutsche Bank analysts point out that in the UK, MPs will be returning to Parliament today, where they will resume debate on the Withdrawal Agreement Bill that implements the Brexit deal into UK law.

"The House of Commons is scheduled to debate the bill over the next 3 days, but with the government having an 80-seat majority in the Commons following last month's election, there aren't expected to be any issues over its passage. Elsewhere, the Telegraph reported overnight that the UK government will deliver its budget on March 11. Chancellor Sajid Javid's first budget is likely to be expansionary as during the election campaign he promised to loosen constraints on borrowing to the tune of up to £20 bn a year for capital spending."

China will encourage the development of annuities and endowment insurance to diversify people's investment into the stock market, instead of direct share purchases from savings, the government-backed Securities Times said.

"The key consideration is to cultivate a multi-layer capital market," the newspaper reported, quoting Xiao Yuanqi, spokesman of China Banking and Insurance Regulatory Commission (CBIRC).

"There'll be part of savings flows to the institutional investors for sure, then the professional investors can allocate those funds to bonds and equities investment," Xiao had said in a media briefing.

"We didn't mean to encourage direct purchase of shares from household savings."

The regulator would learn from overseas experience and explore the risk disposal framework of problematic institutions, further strengthen the shareholding management of smaller banks to fend off contagious risks, the paper quoted Xiao as saying.

To recapitalize the cash-starved banking sector, Xiao said the regulator would also develop capital tools to replenish banks' non-tier-one capital ratios.

In view of Karen Jones, analyst at Commerzbank, USD/CHF's outlook is negative and the immediate downside bias is maintained by the .9745 accelerated downtrend.

"Below .9647 targets the September 2018 low at .9543. We have the .9623 23.6% retracement from the 2015 low also here. Slightly longer term we look for a fall back to the 2018 low at .9188, this is also the 38.2% retracement of the same move from 2015. While rallies are capped by the lows seen in September and October 2019 at .9841/44, the market will remain immediately offered. A rise above the .9844 resistance would suggest recovery to the .9707/22 band of resistance, which if seen we would again look to cap."

According to the report from Federal Statistical Office (FSO), the consumer price index (CPI) remained stable in December 2019 compared with the previous month, remaining at 101.7 points (December 2015 = 100). Inflation was +0.2% compared with the same month of the previous year. The average annual inflation reached +0.4% in 2019.

The average annual inflation for 2019 corresponds to the rate of change between the annual average of the CPI for 2019 and that for 2018. The annual average is equal to the arithmetic mean of the 12 monthly indices of the calendar year. The average annual inflation reached +0.4% in 2019. This increase is due in particular to higher prices for housing rentals and for new cars. In contrast, prices for petroleum products and medicines decreased. Prices for domestic products increased by +0.5% on average, those for imported products remained stable. The average annual inflation reached +0.9% in 2018 and +0.5% in 2017.

The stability of the index compared with the previous month is the result of opposing trends that counterbalanced each other overall. Prices for hotels and mobile communication increased. In contrast, prices for products for face care and make-up and those for fruit or vegetables juices decreased.

Japanese Finance Minister Taro Aso said on Tuesday there was no change to the view that the economy remains in moderate recovery, despite rising pressure from a global slowdown.

"It's true that manufacturers are mainly being affected by global slowdown," Aso told reporters after a cabinet meeting. "But fundamentals that support domestic demand remains solid."

Aso also said he did not expect a repeat of deep declines in demand as happened during the previous sales tax hike in 2014.

Danske Bank analysts suggest that market focus continues to be on the geopolitical situation in the Middle East.

"In terms of data releases, the highlight today is euro area inflation. We expect it to show that the ECB's 'mild increase in underlying inflation pressures' came to a halt in December with core inflation falling back to 1.2%. Despite this, higher food and energy prices should still help lift headline inflation further and country figures point to a reading of 1.3%. We also get euro area retail sales for November. US ISM non-manufacturing is due for release today. Even though there is usually not a strong correlation between non-manufacturing and manufacturing (which was very weak on Friday), the number will likely gain significant attention. ISM non-manufacturing is already at a relatively weak point. We are also monitoring the employment sub-index for clues what to expect on Friday when the official jobs report is due out. We believe the labour market continued to tighten in December."

EUR/USD

Resistance levels (open interest**, contracts)

$1.1307 (2347)

$1.1283 (1968)

$1.1267 (2512)

Price at time of writing this review: $1.1187

Support levels (open interest**, contracts):

$1.1124 (2232)

$1.1085 (4777)

$1.1041 (3994)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date February, 7 is 42647 contracts (according to data from January, 6) with the maximum number of contracts with strike price $1,1100 (4777);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3312 (925)

$1.3268 (1208)

$1.3237 (873)

Price at time of writing this review: $1.3156

Support levels (open interest**, contracts):

$1.3020 (2730)

$1.2987 (1117)

$1.2951 (1777)

Comments:

- Overall open interest on the CALL options with the expiration date February, 7 is 16751 contracts, with the maximum number of contracts with strike price $1,3500 (2359);

- Overall open interest on the PUT options with the expiration date February, 7 is 17045 contracts, with the maximum number of contracts with strike price $1,3100 (2730);

- The ratio of PUT/CALL was 1.02 versus 1.03 from the previous trading day according to data from January, 6

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.