Posted on: 18 February 2016, by: Pepperstone Support, category: Market Review
All about EM today and the Fed:
Banxico, in an unscheduled meeting, hiked rates by 50bps and abandoned its mechanical-based, FX intervention strategy for a more “free-style” approach. Mexico’s Finance Minister simultaneously announced spending cuts. Before these announcements, Banxico was reported to directly intervene in spot. USDMXN started in NY around 18.80 and dropped to 18.20 on suspected intervention. Lows in the 17.96s followed Banxico and it now tests 18.35/36.
Iran oil minister – in arguably the most indirect wording possible – essentially said it’s not participating in a production freeze. Oil was surprisingly bid after the announcement, with WTI rallying to $31 and settling, $31.50. However, weekly inventory risk (API and DoE) is ahead.
Tragedy struck in Turkey’s capital – a car bomb, targeted at a military vehicle, has killed at least 28. The PM has cancelled his trip to Brussels for the EU summit.
S&P downgraded Saudi Arabia and Brazil, while affirming Russia’s rating.
Between MXN and oil gains, risk sentiment was broadly supported. S&P rallied 1.65%, while US 10y yields recovered above 1.80%. EM and G10 commodity FX was bid
FEDERAL RESERVE POLICYMAKERS DISCUSSED ALTERING THE APPROPRIATE PATH FOR THE FEDERAL FUNDS RATE - MINUTES FROM JANUARY POLICY MEETING
A NUMBER OF FED POLICYMAKERS VIEWED THE RISKS TO THE INFLATION OUTLOOK AS BEING TO THE DOWNSIDE, REITERATED NEED TO SEE DIRECT EVIDENCE OF MOVE TOWARD FED'S 2 PERCENT TARGET
A NUMBER OF FED POLICYMAKERS WERE CONCERNED ABOUT DRAG ON U.S. ECONOMY FROM A POSSIBLE GREATER-THAN-EXPECTED SLOWDOWN IN CHINA, OTHER EMERGING MARKETS.
US Data remains solid, underpinning the bid in equities:
Total IP rose by 0.9 percentage point in January, while we and the Street looked for an increase of about half that amount. There was a downward revision to December IP from -0.4 percentage point to -0.7 percent, but output was still higher on net over the two months, relative to expectations.
PPI for final demand rose by 0.1 percentage point month-on-month in January.
US Housing starts fell from 1.143 million to 1.099 million in January.