Article / 25 January 2018 at 8:00 GMT

Morning Markets: Oil spikes above $71/b as dollar crumbles

Senior Editor / Saxo Bank
Denmark

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Watchlist

  • New Zealand: CPI (already published)
  • Germany: GfK consumer climate survey (0700 GMT)
  • Spain: Economically active population survey, unemployment rate (0800 GMT)
  • Norway: Norges Bank Monetary policy decision (0900 GMT)
  • South Africa: Producer price index (0930 GMT)
  • EU: ECB interest rate announcement (1245 GMT)
  • US: Unemployment claims (1330 GMT)
  • CA: Payroll employment (1330 GMT)
  • US: New residential sales (1500 GMT)

Markets are braced for a busy day that's packed with risk events ranging from European Central Bank and Norges Bank policy decisions to a new German consumer sentiment survey and jobs updates from the US and Canada, as well as a slew of blue-chip corporate earnings reports.

And if that wasn't enough, the WEF in Davos continues apace with market watchers looking ahead to tomorrow's star turn, US president Donald Trump, who will address fellow world leaders where he will likely be tempted to preach his 'America First' protectionist creed.

All of this takes place against a backdrop of a seriously weakened dollar, which crumbled yesterday after the US Treasury secretary, Steven Mnuchin, voiced support for the weaker greenback, saying it was beneficial to US trade. This unexpected intervention unnerved markets and the dollar moved sharply lower and propelling EURUSD past 1.24 for the first time in over three years while China's renminbi hit a two-year high.

Though the dollar steadied somewhat in Asian trade, commodities took full advantage of the slide and Brent crude oil zoomed beyond $71/barrel and gold moved into shinier territory and targeted a key area of resistance on the charts.

Market signals

Asian session

  • NZ's quarterly CPI rose 0.1% in the final quarter of 2017; below the expected 0.4%
  • The poor performance on Wall St and falls in Europe weighed on Asian investor sentiment
  • The ASX200 closed down 0.1% at 6050; the Nikkei and Hang Seng were also lower
  • Gold edged up to its highest since August 2016
  • PBoC's current governor isn't on a new list of the nation's top political advisory body
  • Zhou's absence on the list is a strong signal of his looming retirement
  • The rise of protectionism is a recurrent theme at the Davos summit
  • Speaking in Davos, Alibaba founder Jack Ma urged world leaders to resist protectionism
  • Comments from US Treasury Secretary Steve Mnuchin at Davos drove the USD lower
  • Today's ECB interest rate announcement could impact the euro side of EURUSD
  • Crude has surged to a three-year high above $65/b
  • Copper soared 3.3% higher on the London Metal Exchange

Forex ahead

  • Several currencies, including the euro, JPY and AUD surged higher on USD weakness
  • The AUD rose above US81¢ before falling back to US80.93$

From the Floor

Talking down. "Mnunchin crushes the dollar with his comments – GBPUSD outstrips fundamentals," says Hardy.

Share support. "The lower dollar means stronger equities, at least based on the relationship seen since 2009," says Garnry.

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

In opinion

Iron ore gains
Iron ore prices inched higher, thanks to demand from steel mills, but trading is muted in China as the Lunar New Year approaches, says the team at Saxo Capital Markets Australia.

Crypto effect
Cryptocurrencies suffered some heavy losses last week but the sector continues to generate news and headlines, writes Jacob Pouncey.

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The 11 nations – Japan, Canada, Australia, Mexico, Malaysia, Singapore, Chile, Peru, Vietnam, New Zealand and Brunei – that signed the resurrected TPP deal hope a future US administration will join the free-trade pact. Photo: Shutterstock

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