Forex-novosti i prognoze od 08-01-2020

Analysts at Wells Fargo expect the pace of nonfarm hiring to slow in December, with employers adding 150K jobs. The report will be released on Friday.

• "Secondary labor market indicators continue to suggest a slower pace of hiring in 2020. Layoffs rose in December, though they remain low and consistent with a tight labor market. Job openings, however, have rolled over and small business hiring plans remain below last year's level.
• Although we expect the pace of hiring to slow, the unemployment rate should remain steady at its 50-year low of 3.5%.
• The tight labor market should continue to translate into modest wage growth. We expect average hourly earnings rose 0.2% in December, which would suggest a modest drop in the year-ago rate to 3%.
• This week's report will incorporate revisions to the past five years of the seasonally adjusted household survey data. Starting in January, the household survey data will reflect the introduction of the 2018 Census occupational classification system and the 2017 Census industry classification system.
• Nonfarm payroll growth should average 190K in the fourth quarter, in-line with the Q3 pace. Looking ahead, we expect job gains to slow markedly in 2020, though hiring for the 2020 Census will likely disrupt the quarterly estimates."

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories increased by 1.164 million barrels in the week ended January 3. Economists had forecast a drop of 3.572 million barrels.

At the same time, gasoline stocks surged by 9.137 million barrels, while analysts had expected an increase of 2.654 million barrels. Distillate stocks jumped by 5.330 million barrels, while analysts had forecast a climb of 3.874 million barrels.

Meanwhile, oil production in the U.S. was unchanged at 12.900 million barrels a day.

U.S. crude oil imports averaged 6.7 million barrels per day last week, up by 379,000 barrels per day from the previous week.

• Says that biggest threat to economy is downturn in trade
• A downturn in trade has already happened

Analysts at ING point out that with two months of data for 2019 still to be reported, world trade in goods is on track to have contracted 0.5% for the full year.

• "Industrial production in advanced economies, a major driver of world trade in goods, has been a washout too. The eurozone, US, and Japan all experienced declines over the last 12 months. The outlook for 2020 is not particularly bright either, with manufacturing Purchasing Managers Indexes (PMIs) in the US and China having bottomed out while those in the euro area point to continued contraction. In the euro area, inconclusive trade negotiations with the US and the ongoing threat of auto tariffs, as well as uncertainty surrounding Brexit, continue to weigh on activity. This matters a lot for world trade, where the EU accounts for just under a third of flows.
• Our model shows that the momentum in global industrial production, subdued as it is, implies growth of around 1% in 2020, and underlying growth in international goods trade of around 0.6%. When we add to this underlying growth the direct effects from the trade war, we derive our base case forecast for world trade and the growth rate if downside or upside risks materialise.
• Our base case is that we expect the US to assume a tough stance and step up its trade war rhetoric, but for tariffs to remain largely at their current levels in 2020.
• With no major new tariff increases, the trade war will only directly drag on goods trade growth to the extent that tariff increases in 2019 feed into 2020. This should leave overall trade growth at 0.5%."

Analysts at Deutsche Bank note that in Spain, Prime Minister Sánchez's coalition government received the narrow backing of the Spanish parliament yesterday, with a vote of 167-165 in favour, thanks to 18 abstentions.

• "The country has experienced sustained political gridlock over the last year, having gone to the polls twice in 2019 after no government could be formed following the first election in April. The subsequent election in November then saw the formation of a new coalition between Sanchez's Socialist party and the left-wing Podemos, but they still only have a minority of seats in Parliament, having relied on the abstention of Catalan separatists in order to win yesterday's vote."

U.S. stock-index futures rose slightly on Wednesday, making back a steep overnight tumble after Iran fired rockets at an Iraqi airbase that hosts U.S. troops.

Global Stocks:

FX strategists at UOB Group note a deeper pullback is expected in case USD/CNH clear the 6.9250-level.

• "24-hour view: The rapid and sharp drop to 6.9292 and the subsequent rebound in USD came as a surprise. The choppy price action has resulted in a mixed outlook. For today, USD is expected to trade sideways, likely staying within yesterday's 6.9292/6.9678 range.
• Next 1-3 weeks: We have held the same view since last Thursday (02 Jan, spot at 6.9700) that USD is expected to trade sideways between 6.9300 and 7.0200 but we highlighted 'the bottom of the expected range at 6.9300 is more vulnerable'. While USD rebounded after plummeting to a low of 6.9292 yesterday (07 Jan), the risk for further USD weakness has increased. However, USD has to close below December's low near 6.9250 in order to indicate that it is ready for a sustained decline in the coming weeks. Meanwhile, USD is expected to stay on the back foot unless it can reclaim 6.9800."

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

Boeing (BA) downgraded to Market Perform from Outperform at Cowen; target lowered to $371

Cisco (CSCO) downgraded to Neutral from Buy at BofA/Merrill

The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed on Wednesday the U.S. private employers added 202,000 jobs in December.

Economists had expected a gain of 160,000.

The increase for November was revised noticeably up to 124,000 from the originally reported 67,000.

"As 2019 came to a close, we saw expanded payrolls in December," noted Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "The service providers posted the largest gain since April, driven mainly by professional and business services. Job creation was strong across companies of all sizes, led predominantly by midsized companies."

Meanwhile, Mark Zandi, chief economist of Moody's Analytics, said, "Looking through the monthly vagaries of the data, job gains continue to moderate. Manufacturers, energy producers and small companies have been shedding jobs. Unemployment is low, but will begin to rise if job growth slows much further."

Walgreens Boots Alliance (WBA) reported Q1 FY 2020 earnings of $1.37 per share (versus $1.46 in Q1 FY 2019), missing analysts' consensus estimate of $1.41.

The company's quarterly revenues amounted to $34.339 bln (+1.6% y/y), generally in line with analysts' consensus estimate of $34.446 bln.

WBA fell to $55.81 (-5.87%) in pre-market trading.

Bert Colijn, a senior Eurozone economist at ING, notes that the Eurozone's Economic Sentiment Indicator increased to 101.5 from 101.2 in December as the divergence between manufacturing and services increases.

• "The service sector is the only game in town for Eurozone growth at the moment. That's been the case for most of 2019 and December proved to be no exception. As weakness in industry continues and according to some measures is even worsening, expectations of negative spillovers to the service sector remain economists' top concern, but so far that hasn't happened. This is quite remarkable given the duration of the decline in industrial production that already started in December 2018.
• The increase in services confidence was broad-based as both the assessment of recent demand and expectations for the months ahead improved significantly. Interestingly, the optimism of the service sector - mostly dependent on domestic demand - was not shared by consumers, as consumer confidence declined from -7.2 to -8.1.
• Industrial confidence declined from -9.1 to -9.3, as the divergence between industry and services increased again. Order books and the assessment of recent production decreased again, indicating that the year ended with industry in recession. As expectations for the months ahead crept up, some return of industrial confidence seems to be on the cards, perhaps fueled by US-China trade developments and the passing of the US car tariff deadline without implementation. This warrants some cautious optimism about the state of Eurozone industry at the start of 2020, although weakness is far from over."

"There were no American casualties in Iranian missile strikes targeting bases in Iraq that hosted U.S. and Iraqi soldiers, a U.S. official said, asking not to be named because the information hasn’t yet been made public.

The attacks used guided missiles and in this instance, Iran appeared to be shooting to miss, the official said. Iraq’s prime minister’s office said earlier that it got verbal notice from Iran prior to the attack, and no casualties were reported among Iraqis."

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. fell 1.5 percent for the last two weeks of 2019. The MBA published data for two weeks because it was closed over the holidays.

According to the report, refinance applications slumped 8 percent from two weeks ago, while applications to purchase a home surged 5 percent.

Meanwhile, the average fixed 30-year mortgage rate declined to 3.91 percent from 3.99 percent two weeks earlier.

"Mortgage rates dropped last week, as investors sought safety in U.S. Treasury securities as a result of the events in the Middle East, with the 30-year fixed mortgage rate declining to its lowest level since early October," said Mike Fratantoni, MBA's chief economist. "In the middle of December, we really felt the vibe was going to pick up, and the market was going to pick up in January, due to several people calling to get pre-approved in December," he added. "Typically they call getting pre-approved in February or March."

• EU and UK will have to prioritize what they want agreed by the end of 2020 if there is no extension to the transition period
• Britain's good access to EU single market depends on keeping level playing field on taxation, environment, labour and state aid standards
• EU will prioritize the integrity of its single market and customs union
• EU wants the new partnership to be zero tariffs, zero quotas, zero dumping
• EU-British partnership must include comprehensive security partnership to fight cross-border threats

FX strategists at UOB Group expect further softness in USD/JPY, although a break below the 107.00-handle would not be favoured for the time being.

• "24-hour view: While our view for USD to 'edge above 108.50' yesterday was not wrong (overnight high of 108.62), the sharp sell-off after the close in NY was clearly unexpected (Iran headlines sent USD to a low of 107.80 at the time of writing). Further weakness appears likely but 107.50 is a relatively strong support and may not yield so easily (the next support of note is further down at 107.00). Resistance is at 108.20 followed by 108.50.
• Next 1-3 weeks: As highlighted, the weakness is not showing sign of stabilization and USD could continue to weaken. However, the prospect for a break of the mid- to long-term support at 107.00 is not high for now. On the upside, a breach 108.85 (no change in 'strong resistance' level) would indicate that the weakness has stabilized."

Analysts at TD Securities note the U.S. ADP series has not been a reliable indicator of what to expect in the BLS report, but it can be market-moving nonetheless.

• "We see upside risk for the December ADP data, even as we see downside risk for payrolls on Friday. The data diverged in the opposite direction in November: A weak 67K rise in the ADP series was followed by a 254K surge in private payrolls (266K in total). In Fedspeak, Governor Brainard will be speaking on the Community Reinvestment Act."

The Bank of Japan is likely to revise up slightly its economic forecast for the fiscal year starting in April to reflect an expected boost from the government's latest spending package, sources familiar with its thinking said.

Under current projections made in October, the BOJ expects Japan's economy to expand 0.7% in fiscal 2020, accelerating to 1.0% growth the following year.

At its Jan. 20-21 rate review, the BOJ is seen revising up its growth projection for fiscal 2020 to near 1%, taking into account the boost from the government's $122 billion stimulus package, three sources said on condition of anonymity. The conflict between Iran and the United States, however, could potentially change the picture as a spike in oil costs and fears of military escalation could cool global growth and Japanese business sentiment, a fourth source said.

Productivity in Britain, a key weak point of the country's economy, improved slightly in the July-September period of last year, according to official data published on Wednesday.

After contracting in the previous four quarters, output per hour worked rose by 0.1% in the third quarter compared with the same period of 2018, the Office for National Statistics said.

Growth in productivity is key to the long-term prospects for growth and prosperity of an economy.

"Although productivity grew on the year, the underlying picture is of sustained weakness since 2008, with growth over the past year being only a third of the average over the last 10 years or so," ONS statistician Katherine Kent said.

Over the last decade, annual growth in productivity has yet to even touch its pre-financial crisis average between 1972 and 2008.

According to the report from European Commission, in December 2019, the Business Climate Indicator (BCI) for the euro area remained broadly unchanged (−0.04 points to −0.25). With the exception of production expectations, which improved markedly, all the components of the BCI worsened.

The European Commission also reported that in December the Economic Sentiment Indicator (ESI) remained broadly unchanged in the euro area (+0.3 points up to 101.5)1 and was stable in the EU (at 100.0 points) In the euro area, the ESI's stabilisation resulted from markedly higher confidence in services, construction and, to a lesser extent, retail trade, while confidence worsened among consumers and remained virtually unchanged in industry. Industry confidence remained virtually stable (-0.2), as a result of managers' more optimistic production expectations being offset by the deterioration of their appraisals of the stocks of finished products and the current level of overall order books. The strong increase in services confidence (+2.2) was driven by managers' more optimistic views on all three components, i.e. the past business situation, past demand and expected demand. The decline in consumer confidence (-0.9) reflected a decline in expectations concerning households' financial conditions and the general economic situation, while households' assessments of past financial conditions and their intentions to make major purchases remained broadly stable. The increase in retail trade confidence (+1.0) was due to retailers' more positive views on the present and, to a lesser extent, expected business situation and a stable perceived adequacy of the volume of stocks. The marked increase in construction confidence (+2.2) was fuelled by managers' more optimistic employment expectations and assessment of the level of order books. Finally, financial services confidence (not included in the ESI) rose (+1.6).

Karen Jones, analyst at Commerzbank, suggests that USD/JPY's outlook is neutral to negative - it remains capped by the 2018-2020 downtrend at 109.52, but is showing a reluctance to sustain a break below the 107.89 November low, which has so far held on a closing basis.

"The low overnight was 107.65 and this guards the 106.48 October low and the 105.00 region. Initial resistance is the 55 day ma at 108.91/109.07 and we look for rallies to struggle here, the intraday Elliott wave counts are also indicating failure here. Only on a weekly chart close above the 2015- 2019 downtrend line and the December high at 109.72/110.27 (not favoured) would we question our bearish bias."

A hard Brexit at the end of this year is still a possibility and may be as damaging economically as if Britain had left the European Union without a deal, Dutch central bank Governor Klaas Knot said.

"In economic terms there may be little difference between a no-deal Brexit that could have occurred on the 31st of January, and a hard Brexit that could still occur at the end of 2020," Knot, who also sits on the ECB's Governing Council, said.

"This would happen if the EU and the UK are unable to agree on a timely trade deal. And if there is no mutual consensus on extending the transitional period beyond 2020," Knot added.

According to Karen Jones, analyst at Commerzbank, GBP/USD is consolidating near term as it remains capped by Fibonacci resistance at 1.3285, initial resistance is the minor downtrend at 1.3194.

"We look for dips lower to remain well supported by the 55 day ma at 1.2990. The low on the 23rd December was 1.2908 and while above here we will assume an upside bias to retest the December high at 1.3515. The Fibonacci resistance at 1.3285 guards the December high at 1.3515 guards the September 2017 high and 38.2% retracement (of the move down from 2014) at 1.3658/68. This guards the more important 1.3918 2007 -2020 downtrend. Failure at the 1.2908 support would put the 200 day moving average at 1.2690 back on the plate."

According to the report from Halifax Bank of Scotland, house prices in December were 4.0% higher than in the same month a year earlier. Economists had expected a 1.5% increase. On a monthly basis, house prices rose by 1.7%. Economists had expected a 0.2% decrease.

In the latest quarter (October to December) house prices were 1.0% higher than in the preceding three months (July to September)

Russell Galley, Managing Director, Halifax, said: "Average house prices rose by 4% over 2019, at the top of our predicted range of 2% to 4% growth for the year. This was driven by a monthly gain of 1.7% in December which was the biggest monthly increase of 2019, pushing up the year-on-year growth rate and reflecting that December 2018 was a particularly weak month. Looking ahead, we expect uncertainty in the economy to ease somewhat in 2020, which should see transaction volumes increase and further price growth made possible by an improvement in households' real incomes".

According to Danske Bank analysts, market focus is on the Iranian attack this morning and on possible retaliation measures from the US.

"In the majors, it is a fairly thin data calendar with a string of tier 2 releases with notably consumer and business confidence data in the euro area . For the economic sentiment indicator, we will watch whether it follows the December PMI signal (stabilisation) or IFO (further improvement). Today, PM Boris Johnson will meet European Commission chief Ursula von der Leyen in Downing Street for their first face-to-face talks. Von der Leyen is also scheduled to hold a speech on Brexit. We do not expect any major news given that the EU is only about to agree on a negotiating mandate after the UK has formally left the EU. In the US we get the ADP report, which could influence expectations ahead of Friday's non-farm payroll report even if the correlation recently has been less than stellar."

According to the report from Insee, in December 2019, households' confidence in the economic situation has declined for the first time since December 2018. At 102, the synthetic index has lost three points. Nevertheless, it remains above its long-term average (100).

In December, households' opinion balance on their future financial situation has lost four points and is back to its long-term average. The balance related to their past financial situation has fallen by one point and remains above its long-term average.

Furthermore, the share of households considering it is a suitable time to make major purchases has decreased compared to the previous month: the corresponding balance has lost two points and remains well above its average.

In December, households' opinion on their expected saving capacity has deteriorated: the corresponding balance has fallen by four points. On the other hand, the balance related to their current saving capacity has increased by one point. Both balances remain above their long-term average.

The share of households considering it is a suitable time to save has been stable: the corresponding balance thus remains below its long-term average.

Major central banks were running out of tools to fight an economic downturn, Bank of England Governor Mark Carney said in an interview with the Financial Times.

"It's generally true that there's much less ammunition for all the major central banks than they previously had and I'm of the opinion that this situation will persist for some time," the outgoing governor said.

"If there were to be a deeper downturn, [that requires] more stimulus than a conventional recession, then it's not clear that monetary policy would have sufficient space" he added.

Carney cautioned that the global economy is heading towards a "liquidity trap" and policy loosening would fail to encourage additional spending.

The governor suggested that the government needs to consider fiscal measures such as tax cuts or public spending to tackle a downturn. He remained optimistic about the economy after the Brexit.

Based on provisional data, the Federal Statistical Office (Destatis) reports that price-adjusted new orders in manufacturing had decreased in November 2019 a seasonally and calendar adjusted 1.3% on the previous month. Economists had expected a 0.3% increase. For October 2019, revision of the preliminary outcome resulted in an increase of 0.2% compared with September 2019 (provisional: -0.4%). This revision was caused by modified seasonal adjustment. Price-adjusted new orders without major orders in manufacturing had increased in November 2019 a seasonally and calendar adjusted 1.0% on the previous month.

Domestic orders increased by 1.6% and foreign orders fell 3.1% in November 2019 on the previous month. New orders from the euro area were down 3.3%, new orders from other countries decreased 2.8% compared to October 2019.

In November 2019 the manufacturers of intermediate goods saw new orders increase by 0.2% compared with October 2019. The manufacturers of capital goods showed decreases of 2.1% on the previous month. Consumer goods saw new orders unchanged

EUR/USD

Resistance levels (open interest**, contracts)

$1.1286 (2692)

$1.1256 (2981)

$1.1233 (2589)

Price at time of writing this review: $1.1152

Support levels (open interest**, contracts):

$1.1110 (2253)

$1.1076 (4790)

$1.1036 (4055)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date February, 7 is 45481 contracts (according to data from January, 7) with the maximum number of contracts with strike price $1,1100 (4790);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3289 (927)

$1.3239 (1204)

$1.3204 (873)

Price at time of writing this review: $1.3131

Support levels (open interest**, contracts):

$1.3007 (2728)

$1.2976 (1118)

$1.2942 (1998)

Comments:

- Overall open interest on the CALL options with the expiration date February, 7 is 19059 contracts, with the maximum number of contracts with strike price $1,3300 (2489);

- Overall open interest on the PUT options with the expiration date February, 7 is 17309 contracts, with the maximum number of contracts with strike price $1,3100 (2728);

- The ratio of PUT/CALL was 0.91 versus 1.02 from the previous trading day according to data from January, 7

* - 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.