Friday 16th January: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei down 1.90 %, Shanghai Composite gained 1.10 %, Hang Seng declined 0.80 %, ASX dropped 0.60 %
  • Commodities: Gold at $1260 (-0.40 %), Silver at $17.10 (-0.05 %), WTI Oil at $46.65 (+0.85 %), Brent Oil at $48.70 (+1.10 %)
  • Rates: US 10 year yield at 1.72, UK 10 year yield at 1.50, German 10 year yield at 0.47

News & Data:

  • Japan Tertiary Industry Activity Index 0.2 %, Expected: 0.3 %, Previous: -0.1 %
  • ECB Coeure: To decide if bonds should be certain states or all EZ
  • ECB Coeure: To review US, UK QE to determine the bond purchase amount
  • ECB Coeure: Eurozone is not in deflation but risk has worsened
  • ECB Coeure: Weaker than expected growth requires a response
  • Japanese Econ Minister Amari: SNB move caused Jpy to rise and Japanese stocks to fall
  • Amari: Effects from SNB on stocks to be temporary
  • Amari: Drawbacks to cheaper oil not limited to Japan
  • Japanese Finance Minister Aso: Must watch how central bank steps in other countries affect Japan’s markets
  • Swiss Franc Roils Markets as SNB Abandons Cap (BBG)
  • Asian Stocks Slide With U.S. Futures, Bonds Climb on SNB (BBG)
  • Franc’s Surge Ranks Among Largest Ever in Foreign Exchange (BBG)
  • Gold Set for Biggest Weekly Climb in 10 Months After Swiss Shock (BBG)

Markets Update:

Asian equities are mostly lower this morning as investors and traders rushed into safe havens amid the extreme CHF volatility. Gold and Silver were the main beneficiaries from it, while Oil already retraced most of it’s gains from yesterday. EUR/CHF is still pretty much untradeable. Liquidity remains poor and we could see random 100-200 pips moves any time, so staying out of any CHF positions seems like the best strategy until things stabilize. USD/CHF looks very attractive from a long-term perspective, but again, it is better to wait for liquidity too improve rather than rush into any position in such a market environment.

EUR/USD dropped to a low of 1.1565 after the SNB announcement. The Swiss central bankers definitely seem to believe that an European QE programme will be announced next week and the market is more happy than ever to sell Euros on any rally. GBP/USD didn’t suffer too much from yesterday’s events and is likely to consolidate further as the focus remains on the Euro and the Swiss Franc in the near-term. Meanwhile, the AUD and NZD gained from the recovery in commodities. While risk appetite remains low, the Aussie and Kiwi Dollar might seen as attractive currencies to avoid the turmoil in Europe.

Looking ahead, we have European inflation data at 1000 GMT and US inflation figures at 1330 GMT as the main events of the day.

Upcoming Events:

  • 07:00 GMT – German CPI (0.0 % m/m, 0.2 % y/y)
  • 07:00 GMT – German HICP (0.1 % m/m, 0.1 % y/y)
  • 08:15 GMT – Swiss Retail Sales (1.1 % y/y)
  • 10:00 GMT – Euro Zone CPI (-0.1 % m/m, -0.2 % y/y)
  • 10:00 GMT – Euro Zone Core CPI (0.8 % y/y)
  • 12:50 GMT – FOMC Member Kocherlakota speaks
  • 13:30 GMT – US CPI (-0.4 % m/m, 0.7 % y/y)
  • 13:30 GMT – US Core CPI (0.1 % m/m, 1.7 % y/y)
  • 14:15 GMT – US Industrial Production (0.1 % m/m)
  • 14:15 GMT – US Manufacturing Production (0.2 % m/m)
  • 15:00 GMT – US Michigan Consumer Sentiment (94.1)
  • 15:00 GMT – US Michigan Consumer Expectations (87.0)
  • 18:10 GMT – FOMC Member Bullard speaks

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