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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 14 February 2018 at 8:00 GMT

Morning Markets: Greenback blues ahead of inflation update

Senior Editor / Saxo Bank
Denmark

CHART

 

Watchlist

  • IT: Preliminary GDP (0900 GMT)
  • EU: Flash estimate GDP (1000 GMT)
  • US: CPI (1330 GMT)
  • US: Retail sales (1330 GMT)
  • US: EIA Weekly petroleum report (1530 GMT)

The Japanese yen pushed to new highs in overnight trading, with USDJPY dipping below 1107.00 for the first time since November 2016 as the greenback failed to throw off its recent bout of weakness. Later today, the market will take another temperature reading of the US economy with an update on inflation (13:30 GMT). But although this CPI release is being regarded by many as being of extreme importance, as Saxo's Christopher Dembik points out, we will probably need to gather more data about Q1 to know exactly if we really need to worry about inflation.


Elsewhere, the performance of equity markets was mixed in Asia today, with local factors largely in play, rather than Wall Street-driven anxiety. Hong Kong's Hang Seng surged higher, thanks in part to gains for electric car and battery makers. The outlook for the sector picked up after Beijing announced subsidies to encourage production of clean and green vehicles to clear up the toxic air polluting many Chinese cities. Falls for banks weighed on Australia's S&P/ASX200. And worries about the soaring yen and slower than expected GDP growth in the final quarter of last year weighed on sentiment in Japan, helping to drive the Nikkei 225 into negative territory.


Market signals

Asian session

  • Wall Street rose for a third straight session, buoyed by Amazon.com and Apple
  • Asian shares were mixed; with a 0.43% tumble for the Nikkei 225 and gains elsewhere
  • Hong Kong's Hang Seng surged higher; it was up 1.75% to 30,360.63 at 0630 GMT
  • Japan's GDP growth was 0.1% in Q4, 2017; Q4 was the eighth straigth quarter of growth
  • This is the longest growth stretch in Asia's second largest economy in three decades
  • Crude oil prices were little changed as markets focused on global supply
  • US CPI figures will offer some clues on where markets are heading
  • Goldman Sachs says 10-year yields could hit 3.5% in the next six months
  • Australia's consumer sentiment fell 2.3% in February from the previous month
  • Australia's benchmark S&P/ASX200 closed down 0.25% at 5,841.20
  • Falls for the big four banks ANZ and CBA weighed on the S&P/ASX200
  • Police say the Israeli Prime Minister should be indicted in corruption cases

Forex ahead

  • The US dollar hit a 15-month low against JPY; it was worth ¥107.2000 at 0524 GMT
  • Today's CPI data from the US will impact rate hike expectations, and USD
  • The Australian dollar has added to recent gains; it was worth 0.7882 at 0422 GMT

From the Floor

Hot yen. "The quality of the USDJPY break is in question as it's not accompanied by risk contagion," says Hardy.

New times. "Zuma is definitely on the way out, it's just a question of how easily he goes," says Hardy.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Inflation outlook
Today's US inflation figures will be keenly watched, but inflation is not a game changer for the market and will remain low compared to previous periods, explains Christopher Dembik.


Oil demand
Crude eased its losses as robust worldwide demand helped an Opec-led effort to snuff out excess inventories, writes Saxo's Sydney trading team.


One game only
Asian indices were mixed as investors awaited the release of consumer spending figures from the US, which everybody thinks will tell all, says Saxo's Singapore team.


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Anxious share investors and jittery forex traders are focused on today's US inflation data, which could upset the fragile recovery on global stockmarkets. Photo: Shutterstock

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