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FxPro Forex Analysis: Markets Move on China News


During yesterday’s trading session headlines broke that China would reduce or halt its purchase of US Treasuries. This set off moves in Currencies, Commodities, Bonds and Stock. Gold reached a high of 1327.5, the US 10-Year got to a high of 2.59%, SPX 500 fell to 2736.50, while USDJPY fell to 111.285. GBPUSD jumped up to 1.35617, EURUSD rose to 1.20176, while even pairs that would seem to be unaffected by such a move, like EURGBP, rose to 0.88720. Overnight a Chinese government source corrected the situation by saying the report could have been based on wrong information. The source said that ‘China has been diversifying its FX reserves investments, and China’s investments in US Treasuries is market-driven.’ Much of the moves following the initial headline have been reversed or partially reversed, with the US 10-Year, for example, now at 2.531%.

UK Industrial Production (MoM) (Nov) was released with the number coming in at 0.4% v an expected reading of 0.3%, from a prior of 0.0% that was revised to 0.3%. Industrial Production (YoY) (Nov) was 2.5% v a consensus reading of 1.8%, with a prior of 3.6% that was revised up to 4.3%. Manufacturing Production (MoM) (Nov) was 0.4% v an expected 0.3%, with a previous reading of 0.1% that was revised up to 0.3%. Manufacturing Production (YoY) (Nov) was 3.5% v an expected 2.8%, from a prior of 3.9% that was revised up to 4.7%. Traders of GBP pairs will be watching these data points closely. GBPUSD sold off to 1.34814 after this data was released.

UK NIESR GDP Estimate (3M) (Dec) data was released at 0.6% v 0.5% expected. The previous data came in at 0.5% but was revised up to 0.6%. GBPUSD moved higher after the data was published, rising to 1.35391.

US 10-Year Note Auction. The rate was 2.59% from previous auction’s interest rate of 2.384%. US FOMC Member Bullard spoke in St Louis, stating that the US economy looks good for 2018. The FED’s inflation miss is starting to look persistent and he doesn’t believe there is a high chance of a US recession.

EURUSD is down -0.09% overnight, trading around 1.19380.

USDJPY is up 0.38% in early session trading at around 111.847.

GBPUSD is down -0.10% to trade around 1.34905.

USDCAD is up 0.05%, trading around 1.25511.

Gold is up 0.10% in early morning trading at around $1,317.90.

WTI is down -0.06%, trading around $63.37.

Major data releases for today:

At 09:30 GMT, UK BOE Credit Conditions Survey will be released. GBP pairs will be influenced by this data point.

At 10:00 GMT, Eurozone Industrial Production w.d.a. (YoY) (Nov) will be released, with the consensus pointing to a value of 3.0%, from a prior of 3.7%. Industrial Production s.a. (MoM) (Nov) is expected at 0.8% from 0.2% previously. The EUR may be moved by this data.

At 12:30 GMT, Eurozone ECB Monetary Policy Meeting Accounts will be published. EUR crosses could react to this data.

At 13:30 GMT, US Continuing Jobless Claims (Dec 29) is expected at 1.915M, from a previous number of 1.914M. Initial Jobless Claims (Jan 5) is expected to come in at 245K, from a prior reading of 250K. USD crosses could see increased volatility around this data release.

At 19:00 GMT, US Monthly Budget Statement (Dec) which came in previously at $-139B.

At 20:30 GMT, US FED’s William Dudley will be speaking at the Securities Industry and Financial Markets Association in New York. The speech may affect USD crosses, stocks, commodities and bonds.

At 21:45 GMT, New Zealand Building Permits s.a. (MoM) (Nov) will be released. The previous reading was -9.6%. NZD pairs could be moved by this data.

At 23:50 GMT, Japanese Foreign Investment in Japan stocks (Jan 5) will be released, with a previous number of ¥76.2B. Foreign Bond Investment (Jan 5) will also be released, with a prior number of ¥434.2B.

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