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From the Floor: Data versus the dollar — #SaxoStrats

   • Dollar in focus with US PCE data on tap, FOMC up Wednesday
   • Core yields moving higher 'at moderate pace': Fasdal
   • 'Monster earnings week' ahead as US equities trade at record highs
   • Amazon, Apple, and Alphabet reporting Thursday
   • Fiscal shortfall fears could limit data impact on USD: Hardy

By Michael McKenna 

Today's US PCE release at 13:30 GMT is in focus given the dollar's decline, along with Wednesday's Federal Open Market Committee outing and State of the Union speech, Friday's nonfarm payrolls print, and what Saxo Bank head of equity strategy Peter Garnry calls a "monster week" for corporate earnings.

"It's a big week for USD," says Saxo FX head John J Hardy, "but potential fears of a fiscal shortfall [in the wake of the tax reform bill] could mean that the data have little impact".

In the FX space, Hardy reports that investors should keep an eye on Japanese yields in the wake of the Bank of Japan's attempted walkback of remarks from governor Kuroda, who recently implied that inflation is reaching target levels".

"The 10-year Japanese government bond yield is approaching the key 0.10 level," says Hardy, adding that JPY traders must watch for signs of the BoJ attempting to reinforce its yield-curve control policy.

"We see key resistance at 109.30 and even 110.00 in USDJPY," Hardy concludes.

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Source: Saxo Bank

With core yields rising at what Saxo Bank head of fixed income strategy Simon Fasdal terms "a moderate pace", the risk-on move continues apace as we head into a major earnings week.

The interplay between the record-breaking equities rally, macro data releases, and fixed income trends is the major inflexion point of the week as markets prepare for earnings from Boeing, Facebook, and Microsoft Wednesday; Mastercard, Apple, Amazon, Alphabet Thursday; and Chevron and ExxonMobil Friday.

For more on bonds, forex, and equities, watch today's Morning Call in full.

Michael McKenna is head of editorial content at Saxo Bank


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