Article Highlights

  • AU Westpac consumer sentiment inches up by 0.1% vs. 3.9% decline in December
  • China’s new house prices rose by 12.4% in December vs. 12.6% uptick in November
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The dollar took a breather from its losses from earlier this week as traders brace for Yellen’s speech and Trump’s inauguration this weekend.

Major Events:

PBoC interventions – The People’s Bank of China (PBoC) has been doing its best to stabilize markets this week. The central bank had a cash injection to the tune of 410B CNY today – its biggest since 2004 – after already pumping a net of 270B and 230B in open market operations on Monday and Tuesday.

Word around the hood is that state-owned investors also bought shares to help keep markets afloat on Monday, while some funds were warned against selling big holdings in benchmark indices on Tuesday. Analysts believe that the moves are preparations for the upcoming Lunar New Year holidays though President Xi attending the World Economic Forum in Davos might have also factored in.

FOMC Williams’ speech – San Francisco Fed President John Williams believes that further rate hikes are “appropriate.” In a speech in California, Williams warned that “an economy that runs too hot for too long can generate imbalances, eventually leading to excessive inflation, asset market bubbles, and ultimately economic correction and recession.”

He currently favors further rate hikes especially since the economy has reached “maximum employment goal” and inflation is nearing the Fed’s “price stability goal.” And, if the economy accelerates faster due to fiscal stimulus, Williams is also all for “adjusting upward” in terms of the pace of interest rate hikes.

Williams is not a voting member this year though, so the dollar’s reaction was mostly muted.

Mixed equities trading – Anthony Scaramucci, a senior advisor to U.S. President-elect Trump, warned about the risk from a strong dollar.

In a panel discussion in Davos, Scaramucci warned that “we need to be careful about the rising currency” and that he expects the rising dollar to be the “biggest challenge” to the outlook over the coming year. The sentiment echoed Trump’s weekend comments when he said in an interview that U.S. companies “can’t compete with (China) because our currency is strong and it’s killing us.”

The prospect of officials further jawboning the dollar sent Nikkei to a five-week low, while Chinese indices enjoyed the government intervention as well as the impact of Trump’s remarks.

Australia’s A SX 200 is down by 0.36% but Hang Seng is up by 1.30% and the Shanghai index is up by 0.12%. Nikkei eventually managed to stem its losses to crawl back up by 0.11%.

Major Market Movers:

USD – The dollar pared some of its losses thanks to relatively hawkish FOMC member speeches and profit-taking ahead of Trump’s inauguration.

USD/JPY inched 37 pips (+0.33%) higher to 113.04, EUR/USD slipped by 30 pips (-0.28%) to 1.0679, and AUD/USD fell by 13 pips (-0.17%) to .7551.

GBP – The British pound lost pips across the board after getting a boost from May’s Brexit speech

GBP/USD slipped by 54 pips (-0.44%) to 1.2342, EUR/GBP inched 26 pips higher (+0.26%) to .8665, and GBP/AUD dropped 41 pips (-0.25%) to 1.6346.

Watch Out For:

  • 8:00 am GMT: German final CPI expected to remain at 0.7%
  • 10:30 am GMT: U.K. employment-related reports. Check out Forex Gump’s update to see how you can trade the event!
  • 11:00 am GMT: Euro Zone final CPI (y/y) expected to remain at 1.1%
  • 11:00 am GMT: Euro Zone final core CPI expected to remain at 0.9%

See also:

U.S. Session Recap
London Session Recap

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