Forex-novosti i prognoze od 15-01-2020

• Says Fed reserve management has some effect on risk assets; sensitive from here to seek ways to limit balance sheet
• Is worried about impact of Fed policy on asset prices
• Says anything that curbs uncertainty will help investment, but even so business spending will still be sluggish
• Labor market tight and consumers have solid capacity

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories decreased by 2.549 million barrels in the week ended January 10. Economists had forecast a drop of 0.474 million barrels.

At the same time, gasoline stocks surged by 6.678 million barrels, while analysts had expected a climb of 3.386 million barrels. Distillate stocks jumped by 8.171 million barrels, while analysts had forecast an increase of 1.214 million barrels.

Meanwhile, oil production in the U.S. rose by 100,000 barrels a day to 13.000 million barrels a day.

U.S. crude oil imports averaged 6.6 million barrels per day last week, down by 179,000 barrels per day from the previous week.

• Says phase one trade deal includes 100% ownership of financial companies
• Tariffs were a key part of negotiation process
• Forced technology transfer is a key part of a phase two agreement

Jane Foley, the senior FX strategist at Rabobank, notes that the safe havens CHF and JPY are the best performing G10 currencies on a 1-day view, reflecting the poorer tone of oil and stocks and reflects market concerns that tensions between the U.S. and China could rise again.

• "Insofar as markets have been lifted by optimism surrounding the trade deal for some months now, we maintain there is a significant risk that focus will return to the shortfalls of the deal. Largely on the back of this, we see risk of USD/JPY dipping towards the 107.00 area around the middle of the year.
• US suspicions about Chinese practices have been highlighted by the pressure exerted by China hawks in Washington on the Trump Administration to draft rules that would block more sales to Chinese telecoms giant Huawei.
• It has been clear for some time that Washington's misgivings regarding China stretch well beyond trade and into the realms of national security and global hegemony. For this reason, we see it as enviable that tensions between the two nations are set to rise again. This has the potential to impact market expectations about world growth, reduce risk appetite and increase demand for the safe-haven JPY.
• The JPY's function as a safe haven can limit the day to day influence of Japanese policymakers on the exchange rate. That said, the BoJ's vast QQE policy and its negative interest rate appear to have had some success in undermining the JPY.
• For now. we expect the JPY to be buffeted mostly by changing levels of risk appetite rather than domestic news. Consequently. we are looking for a moderately stronger JPY to emerge during the course of the year."

U.S. stock-index futures fell slightly on Wednesday, as investors digested a fresh round of corporate earnings, while awaiting the signing of the U.S.-China "Phase One" trade deal.

Global Stocks:

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

The report from the New York Federal Reserve showed on Wednesday that manufacturing activity in the New York region improves slightly in January.

According to the survey, NY Fed Empire State manufacturing index came in at 4.8 this month compared to a revised 3.3 in December (originally 3.5), pointing to a small increase in business activity in New York State.

Economists had expected the index to come in at 3.55.

Anything below zero signals contraction.

According to the report, the new orders index rose five points to 6.6, indicating that orders were higher, while the shipments index inched down one point to 8.6, pointing to a modest increase in shipments, albeit at a somewhat slower pace than in December. Meanwhile, the unfilled orders index increased eleven points, but remained negative at -2.7, indicating that unfilled orders continued to decline. Elsewhere, delivery times shortened, and inventories held steady. On the price front, both input prices and selling prices increased at a significantly faster pace than in December.

The Labor Department reported on Wednesday the U.S. producer-price index (PPI) edged up 0.1 percent m-o-m in December, following an unrevised flat m-o-m performance in November.

For the 12 months through December, the PPI rose 1.3 percent, accelerating from 1.1 percent in the previous month.

Economists had forecast the headline PPI would increase 0.2 percent m-o-m and 1.3 percent over the past 12 months.

According to the report, the December advance in the final demand index was the result of a 0.3-percent m-o-m gain in prices for final demand goods, while the index for final demand services was unchanged m-o-m.

Excluding volatile prices for food and energy, the PPI rose 0.1 percent m-o-m and 1.1 percent over 12 months. Economists had forecast gains of 0.2 percent m-o-m and 1.3 percent y-o-y, respectively.

Analysts at TD Securities note that this morning's UK data and BoE comments reinforced the market's recent dovish tone.

• "December CPI surprised to the downside, with the headline at 1.3% y/y (mkt 1.5%), and core CPI at 1.4% y/y (mkt 1.7%). Services CPI fell to 2.1% y/y, its weakest rate in the history of the data going back to 1988. There were three prior instances of 2.1% prints, but those were all March/April readings and skewed by Easter effects. The most notable weak spot in services was in hotels, where after a sharp decline in November and December, the y/y rate has swung from 4.5% y/y in October to -2.2% y/y now. While we had initially thought that the inflation data wouldn't be watched all that closely by the BoE, the weakness in the December data was significant enough to get a bit more attention than usual.
• This morning we also heard from the BoE's Saunders, who was firmly in the dovish camp, as we would have expected after having voted for rate cuts at the last two meetings already. He has a very bearish view of the UK economy from here, and said that it would take a "big bounce" to get UK growth back to potential."

Analysts at TD Securities are expecting the U.S. headline PPI to increase 0.3% MoM (1.5% YoY) in December, on the back of a 0.3% MoM advance in core inflation (1.4% YoY).

• "We pencil in core-core inflation (ex food, energy and trade) at 0.2% m/m.
• Separately, we anticipate some improvement in sentiment following the US-China trade deal to be reflected in an increase in the NY Fed's Empire State manufacturing index to 6 in January from 3.5 in December, which would represent the index's highest level since May.
• The Fed's Beige Book will also be released."
  
  

Goldman Sachs (GS) reported Q4 FY 2019 earnings of $4.69 per share (versus $6.04 in Q4 FY 2018), missing analysts' consensus estimate of $5.56.

The company's quarterly revenues amounted to $9.955 bln (+23.2% y/y), beating analysts' consensus estimate of $8.563 bln.

GS fell to $243.27 (-0.97%) in pre-market trading.

UnitedHealth (UNH) reported Q4 FY 2019 earnings of $3.90 per share (versus $3.28 in Q4 FY 2018), beating analysts' consensus estimate of $3.75.

The company's quarterly revenues amounted to $60.901 bln (+4.3% y/y), roughly in line with analysts' consensus estimate of $61.166 bln.

The company also reaffirmed guidance for FY 2020, projecting EPS of $16.25-16.55 versus analysts' consensus estimate of $16.45.

UNH fell to $286.82 (-0.49%) in pre-market trading.

• Phase One trade deal has very thorough enforceable mechanism
• China has agreed to put together very significant laws to follow through on its commitments
• Certain tech and cybersecurity issues will be in Phase Two of the trade deal
• Phase One trade deal is a very complicated agreement
• It is worth it even if there is no Phase Two agreement

Bank of America (BAC) reported Q4 FY 2019 earnings of $0.74 per share (versus $0.70 in Q4 FY 2018), beating analysts' consensus estimate of $0.69.

The company's quarterly revenues amounted to $22.300 bln (-1.8% y/y), in line with analysts' consensus estimate.

BAC fell to $35.25 (-0.20%) in pre-market trading.

FX strategists at UOB Group note that GBP/USD remains under pressure and could attempt a move to the 1.2900 level in the short-term.

• "24-hour view: GBP traded in-line with our expectations overnight, revisiting the Mon's session lows near 1.2960 (overnight low 1.2955). However, the subsequent rebound to above 1.30 neutralized a large portion of the downside momentum. From here, it is likely GBP would consolidate first at a lower 1.2915/1.3050 range and a move above 1.3120 would indicate that the current downward phase has ended.
• Next 1-3 weeks: Our previous rhetoric was that GBP 'risks breaking the bottom of 1.3000/1.3300 range'. Overnight (13-Jan), GBP took out 1.3000 convincingly and traded to a low of 1.2961 before closing at 1.2987. The subsequent build-up of downside pressures means that GBP is ready to take on Dec's lows at 1.2900 next. All in, GBP is expected to stay under pressure with resistance at 1.3065 and a strong close above 1.3130 would 'neutralize' the current downward pressure."

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. surged 30.2 percent in the week ended January 10, following a 13.5 percent jump in the previous week. That marked the biggest advance since the week ended March 20, 2009.

According to the report, refinance applications climbed 42.7 percent, while applications to purchase a home rose 15.5 percent.

Meanwhile, the average fixed 30-year mortgage rate dropped to 3.87 percent (the lowest level since September 2019) from 3.91 percent.

"Refinances increased for both conventional and government loans, as lower rates provided a larger incentive for borrowers to act," noted Joel Kan, an MBA economist. "It remains to be seen if this strong refinancing pace is sustainable, but even with the robust activity the last two weeks, the level is still below what occurred last fall."

Analysts at TD Securities note that in Canada existing home sales for December will provide the lone data release for Wednesday.

• "Preliminary sales data from Vancouver suggests another sizable pickup in regional sales activity even after rising 55.9% y/y through November, but results from the Toronto real estate board showed a modest pullback.
• With the Bank of Canada monitoring for signs of froth in major housing markets, further acceleration in Toronto and Vancouver could raise red flags for those at the Bank and provide a more difficult environment to provide accommodation to the rest of the economy."
  
  

Analysts at Rabobank suggest that the U.S. PPI data (14:30 CET) will give us a peak into inflation in the pipeline, while the Empire manufacturing index will update us about the state of the economy in New York state.

• "Then (15:00 CET) we go to Canada for existing home sales. Later today, we have several Fed speakers on the agenda: Harker, Daly (17:00 CET) and Kaplan (18:00 CET). Finally (20:00 CET), the Fed will publish its Beige Book with anecdotal evidence on the state of the US economy. Still, most of the attention will go the trade deal signing ceremony in Washington (17:30 CET) and especially the details of the deal that should then be released."
  
  

FX strategists at UOB Group still believe that EUR/USD could be headed for lower levels in the next weeks.

• "24-hour view: EUR was largely sideways overnight in a small range above 1.11. Our view of a mild upside towards 1.1150 (high: 1.1144) panned out as expected. Now, with upside momentum underwhelming, it appears that EUR may have lost its aspirations to propel higher. So, a sideways pattern would more likely preside today, between 1.1105 and 1.1150.
• Next 1-3 weeks: Downward momentum has improved further and the risk for EUR is still on the downside. However, the mid-Dec low near 1.1065 is major support and at this stage, the prospect for a sustained decline below this level is not high. Overall, EUR is expected to remain on the back foot unless it can move above 1.1175 ('key resistance' level was at 1.1195 yesterday). Looking ahead, even if EUR were to break below 1.1065, any further weakness is expected to encounter solid support at 1.1030 followed by 1.1000. In other words, we do not consider the current weakness in EUR as part of a major downtrend."
  
  

Bert Colijn, a senior Eurozone economist at ING, notes that Eurozone industrial production increased by 0.2% in November, which came after a large decline in October.

• "While German and Spanish production rebounded nicely with 0.9 and 1.1% growth respectively, it was mainly due to sharp declines in smaller countries that the eurozone average growth pace disappointed somewhat. Better energy and capital goods production masked declines in consumer goods and intermediates production, indicating that the small uptick was not at all broad-based.
• Eurozone trade data showed a decline in seasonally adjusted exports for November, which was met by a smaller decline in imports, therefore reducing the trade balance to 19.2 billion euros. The decline in exports was in part due to a wind-down of exports to the UK due to stock building ahead of the initial October 31 Brexit deadline. Overall, the exports environment remained subdued in November.
• Still, today's data, although positive, does confirm that it is too early to call an end to the eurozone industrial recession. The December manufacturing PMI still indicated that new orders and current production were falling markedly, which shows that the November industrial data should not be considered to be the start of a recovery. While confidence in the future among industrial businesses has started to improve on the positive news on trade, current conditions are still too weak to call a break from trend."

• Possible negative impact is on productivity, banks and financial stability
• ECB strategic review will start next week

"Based on a fully endogenous economic growth model, we estimate India's annual average economic potential at between 5% and 6% over the course of the decade. Investment in human capital and innovation is necessary to foster Indian future economic growth. In a scenario where the government implements (and intensifies) its education agenda, average annual economic growth could end up being 1.8ppts to 2.8ppts higher than under our baseline scenario (over the period 2023-2030)." Rabobank analysts said.

According to a preliminary estimate by statistics agency Destatis, Germany's economy grew modestly in 2019, slightly beating expectations.

GDP increased by an adjusted 0.6% in 2019, following 1.5% growth in 2018. This was just above economists' forecast of a 0.5% expansion and it is the weakest expansion since 2013..

"The German economy thus has grown for the tenth year in a row. This has been the longest period of growth in united Germany. However, growth lost momentum in 2019. Growth in 2019 was mainly supported by consumption expenditure. German exports continued to increase on an annual average in 2019, though at a slower pace than in the previous years." Destatis said

Destatis said economic performance was up in the service sector, but markedly down in industry.

The first estimate for euro area (EA19) exports of goods to the rest of the world in November 2019 was €197.7 billion, a decrease of 2.9% compared with November 2018 (€203.7 bn). Imports from the rest of the world stood at €177.0 bn, a fall of 4.6% compared with November 2018 (€185.5 bn). As a result, the euro area recorded a €20.7 bn surplus in trade in goods with the rest of the world in November 2019, compared with +€28.0 bn in October 2019. Economists had expected the surplus to fall to €23.3 bn.

Intra-euro area trade fell to €166.0 bn in November 2019, down by 3.8% compared with November 2018.

In January to November 2019, euro area exports of goods to the rest of the world rose to €2 159.0 bn (an increase of 2.5% compared with January-November 2018), and imports rose to €1 955.6 bn (an increase of 1.5% compared with January-November 2018). As a result the euro area recorded a surplus of €203.4 bn, compared with €178.7 bn in January-November 2018. Intra-euro area trade rose to €1 817.9 bn in January-November 2019, up by 0.9% compared with January-November 2

According to estimates from Eurostat, in November 2019 compared with October 2019, seasonally adjusted industrial production rose by 0.2% in the euro area (EA19) and fell by 0.1% in the EU28. Economists had expected a 0.3% increase in the euro area. In October 2019, industrial production fell by 0.9% in the euro area and by 0.6% in the EU28.

In November 2019 compared with November 2018, industrial production decreased by 1.5% in the euro area and by 1.3% in the EU28. Economists had expected a 1.1% decrease in the euro area.

In the euro area in November 2019, compared with October 2019, production of capital goods rose by 1.2% and energy by 0.8%, while production of intermediate goods fell by 0.5%, non-durable consumer goods by 0.7% and durable consumer goods by 0.8%. In the EU28, production of durable consumer goods fell by 0.9%, non-durable consumer goods by 0.6% and intermediate goods by 0.4%, while production of capital goods rose by 0.6% and energy by 0.7%.

According to the report from Office for National Statistics, UK inflation sank unexpectedly to a more than three-year low in December as hotels slashed prices. The Consumer Prices Index (CPI) 12-month rate was 1.3% in December 2019, down from 1.5% in November 2019. Economists had expected a 1.5% increase.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 1.4% in December 2019, down from 1.5% in November 2019. The largest contribution to the CPIH 12-month inflation rate in December 2019 came from housing, water, electricity, gas and other fuels (+0.36 percentage points). The largest downward contributions to the change in the CPIH 12-month inflation rate between November and December 2019 came from accommodation services and clothing.

A separate report from the ONS showed that the headline rate of output inflation for goods leaving the factory gate was 0.9% on the year to December 2019, up from 0.5% in November 2019.

The growth rate of prices for materials and fuels used in the manufacturing process was negative 0.1% on the year to December 2019, up from negative 1.9% in November 2019.

Petroleum products made the largest upward contribution to the change in the annual rate of output inflation. Crude oil provided the largest upward contribution to the change in the annual rate of input inflation.

According to strategists at Commerzbank AG, even the disapproval of the U.S. government may not be enough to prevent the Swiss National Bank from intervening in the currency market.

The Swiss franc reached its highest level since April 2017 against the euro after Washington added Switzerland back to its currency watch list and urged the country to adjust its macroeconomic policies.

Yet strategists say Switzerland's growth and inflation data could make the case for the SNB to continue buying foreign currency in an effort to curtail the franc's appreciation.

"We know from the SNB's intervention activity that the franc is already at critical levels, i.e. at levels at which it has intervened before last year. There is a high likelihood that it will step into the market, or is already active." said Thu Lan Nguyen, a strategist at Commerzbank

SNB data in August suggested the bank had pumped billions of francs into markets, buying foreign currency in an effort to curb the franc's strength. The SNB said Tuesday that its interventions were designed only to offset the ill effects of too strong a currency. The interventions, which aren't aimed at giving the nation a competitive advantage, are disclosed in an annual report, the SNB said in a statement.

• Growth has slowed markedly over the last year, both overseas and here.

• In the UK, the economy has barely grown since the first quarter of last year and the YoY growth in GDP has fallen below 1% for the first time since 2012

• It probably will be appropriate to maintain an expansionary monetary policy and also to possibly cut rates further

• Neutral level of interest rates may have fallen further over the last year or two

• Monetary policy space is limited

• Risk considerations favour a relatively prompt, aggressive response to downside risks

• Most likely outlook is a further period of subdued growth

• Brexit uncertainty may continue, weigh further on the economy

Karen Jones, analyst at Commerzbank, notes that USD/CHF has again sold off to the 0.9659/47 recent low and August low.

"A slide and close below 0.9647 is needed to reassert downside momentum and target the September 2018 low at 0.9543. We have the 0.9623 23.6% retracement from the 2015 low also here. Slightly longer term we look for a fall back to the 2018 low at 0.9188, this is also the 38.2% retracement of the same move from 2015. The market will stay offered while capped by lows seen in September and October 2019 at 0.9841/44. A rise above the 0.9844 resistance would suggest recovery to the 0.9707/22 band of resistance, which if seen we would again look to cap."

China could face difficulties fulfilling its commitment in the so-called phase one trade deal with the U.S., allowing U.S. President Trump to once again raise tariffs on Chinese goods, a trade expert warned.

That's especially the case when the deal - expected to be signed in Washington on Wednesday - would involve Beijing increasing its imports of U.S. goods and services by at least $200 billion over two years, said Deborah Elms, executive director at consultancy Asian Trade Centre.

To meet that additional $200 billion, China would have to buy a "crazy amount" of U.S. "agricultural goods, machinery especially aircraft and energy products," noted Elms. For some products, Beijing may have to more than double its purchases by reducing tariffs on those imports and stop buying them from other sources.

"If the Chinese don't achieve those purchase price targets, the U.S. could impose new tariffs or remove existing promises or all sort of things could happen. I think the risks remain for companies between now and at least November that phase one doesn't even hold," Elms told CNBC.

The U.S., especially the agriculture sector, could also find it challenging to supply that amount of products to China, said Elms.

According to the report from INSEE, in December 2019, the Consumer Prices Index (CPI) accelerated to +0.4% over a month, after +0.1% in November. This rise resulted from higher prices in energy (+0.8% after +0.3%) and food (+0.6% after +0.1%) and a rebound in the prices of services (+0.5% after −0.2%) and manufactured products (+0.2% after −0.1%). Tobacco prices were stable after a 6.0% rise in the previous month. Seasonally adjusted, consumer prices rose by 0.3% in December, after +0.2% in November.

Year on year, consumer prices gathered pace for the second consecutive month: +1.5% after +1.0% in November and +0.8% in October. Economists had expected a 1.4% increase. This rise in inflation came from a sharp rebound in energy prices, a slight acceleration in those of services and a lesser drop in those of manufactured products. Food and tobacco prices rose at the same pace as in the previous month.

Year on year, core inflation barely increased in December: +1.1% after +1.0% in the previous month. The Harmonised Index of Consumer Prices (HICP) rose by 0.5% over a month, after +0.1% in November; year on year, it accelerated to +1.6%, after +1.2% in the previous month.

Analysts at TD Securities expect the overall UK consumer price index to edge up to 1.6% year-on-year in December, supported by a rise in crude oil prices at the end of the year.

"We expect core CPI to slip down to 1.6% y/y, reflecting delayed Black Friday sales spilling into the December data. Our forecast would see headline inflation slightly higher than the BoE's forecast from the November IR, but not enough to be a major consideration for monetary policy. For the BoE, the big question is how much growth recovers, if at all, in the wake of the general election and as the political outlook becomes more certain. On the speaker front, we hear from Saunders at 8:40 GMT, who will likely reinforce the market's dovish view, although we believe that the BoE is more likely to remain on hold this month."

Credit Agricole CIB Research discusses the USD outlook ahead of the Democratic Party's primaries starting in February.

"We have long been highlighting the upcoming US presidential elections as an important FX market driver, especially in the event that a populist politician emerges as the front-runner in the Democratic presidential nominee race. Indeed, such an outcome could have a negative impact on the USD. Given the current standing of Senator Sanders in the polls ahead of the February primaries and the 'Super Tuesday' on March 3, we expect the USD to start losing some ground vs EUR, JPY and CHF in coming weeks," Credit Agricole adds.

Danske Bank analysts point out that they are looking very much forward to the signing of the US-China phase 1 trade deal, as well as the publication of UK inflation data..

"The signing ceremony is scheduled to take place in the White House at 17:30 CET. The 86-page agreement will also be released today. The US and China have said that now the phase 1 trade deal has been finalised, they will get started with phase 2. We think those negotiations are going to be more complicated and think there is a 50% chance of a permanent deal ahead of the US presidential election. We also get UK inflation data for December today. Due to the high uncertainty and weak growth, focus has turned away from inflation, but if inflation comes in lower than expected, it could add fuel to the recent repricing of the Bank of England ahead of the upcoming meeting on 30 January. CPI core was 1.7% y/y in November and is expected to remain unchanged. In the euro area, industrial production data for November is due out at 11:00 CET, which will be interesting given the weakness we have seen in the European manufacturing sector in 2019. The US empire manufacturing index for January is due out at 14:30 CET. We also have some Fed speeches and the Fed Beige Book."

EUR/USD

Resistance levels (open interest**, contracts)

$1.1270 (2617)

$1.1234 (3016)

$1.1207 (1910)

Price at time of writing this review: $1.1134

Support levels (open interest**, contracts):

$1.1082 (4607)

$1.1042 (4424)

$1.0996 (1369)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date February, 7 is 48462 contracts (according to data from January, 14) with the maximum number of contracts with strike price $1,1100 (4607);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3199 (1053)

$1.3167 (1379)

$1.3116 (948)

Price at time of writing this review: $1.3030

Support levels (open interest**, contracts):

$1.2984 (2668)

$1.2962 (1156)

$1.2935 (3054)

Comments:

- Overall open interest on the CALL options with the expiration date February, 7 is 23837 contracts, with the maximum number of contracts with strike price $1,3600 (3948);

- Overall open interest on the PUT options with the expiration date February, 7 is 20098 contracts, with the maximum number of contracts with strike price $1,3000 (3054);

- The ratio of PUT/CALL was 0.84 versus 0.85 from the previous trading day according to data from January, 14

* - 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.