FX & CFD OBCHODOVÁNÍ NESE VYSOKOU MÍRU RIZIKA
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I. Market focus:
A relative calm prevailed in the foreign exchange markets at the beginning of the new week due to the lack of important news and data that could cause strong movements. At the moment, the most notable event is the release of the statistics on Japan's trade balance, which revealed a larger than expected surplus. But these data did not have a significant effect on the dynamics of the yen.
The main topic in the financial markets is the prospects for the tax-reform bill in the United States. The representatives of the Republican Party continue to remain confident that this bill will be passed this week. Some of them even indicate the exact day of the voting - Tuesday. However, the Republicans’ slim 52-48 majority in the Senate, as well as the health problems of Arizona Republican Senator John McCain, who can miss tax bill vote, do not allow sharing the confidence of Donald Trump's party.
Monday’s session will not be very busy with the releases of the data and events of high importance. The most significant reports will be the final estimates on inflation in the Eurozone (10:00 GMT), as well as the Canadian statistics on foreign securities purchases (13:30 GMT).
II. The market highlights are:
Statistics Canada released its Monthly Survey of Manufacturing Friday, which showed that the Canadian manufacturing sales fell 0.4 percent m-o-m in October to CAD53.49 billion, following a revised 0.4 percent m-o-m gain in September (originally a 0.5 percent m-o-m advance). Economists had anticipated an increase of 0.8 percent m-o-m for October. According to the survey, the October decline was primarily attributable to lower sales of motor vehicles (-6.7 percent m-o-m) and other transportation equipment (-5.0 percent m-o-m). Excluding these two industries, manufacturing sales grew 0.5 percent m-o-m. Overall, sales fell in 8 of 21 industries, representing 56.0 percent of the manufacturing sector. Sales of durable goods industries dropped 0.9 percent m-o-m, while sales of nondurable goods industries edged up 0.1 percent m-o-m.
The Federal Reserve revealed Friday that the U.S. industrial production rose 0.2 percent in November after an upwardly revised 1.2 percent m-o-m gain in October (originally a 0.9 percent m-o-m gain). Economists had forecast industrial production would increase 0.3 percent m-o-m. According to the report, manufacturing production (+0.2 percent m-o-m) and mining output (+2.0 percent m-o-m) rose last month, while utilities output (-1.9 percent m-o-m) fell. Excluding the post-hurricane rebound in oil and gas extraction, total industrial production would have been unchanged in November. Capacity utilization for the industrial sector increased 0.1 percentage point m-o-m in November to 77.1 percent. That was 0.1 percentage point below economists expectations and 2.8 percentage points below the long-run (1972–2016) average for the reading.
The weekly report from Baker Hughes, which was released Friday, showed that the number of active U.S. rigs drilling for oil fell by four to 747 during the week ended December 15. The drop follows increases over the last four weeks in a row. Meanwhile, the total active U.S. rig count, which includes oil and natural-gas rigs, also reduced by one to 930, as the gas rig count grew by three to 183 last week. The U.S. rig count is up 293 rigs from this time last year when it stood at 637.
The Ministry of Finance of Japan announced Monday that the country’s trade balance came in at a surplus of a JPY113.36 bln in November, compared to a downwardly revised surplus of JPY284.60 bln in October (originally JPY285.36 billion) and a surplus of JPY146.52 billion in November 2016. Economists had projected a JPY55.0 bln deficit for October. The report showed Japan’s exports increased slower than imports last month. Exports rose 16.2 percent y-o-y in November, following a 14.0 percent y-o-y climb in October, while imports surged 17.2 percent y-o-y last month, compared to an 18.9 percent y-o-y increase in a month earlier.
The Australian Bureau of Statistics (ABS) announced Monday new motor vehicle sales in the country rose 0.1 m-o-m in November in seasonally adjusted terms. That followed a revised flat m-o-m performance recorded in October (originally a 0.5 percent m-o-m decline). In y-o-y terms, sales surged 2.1 percent last month after growing 1.0 percent in the previous month. According to the report, sales of sports utility vehicles increased 1.4 percent m-o-m in November and sales for other vehicles, which include utes, buses and trucks, rose 0.8 percent m-o-m. At the same time, sales of passenger vehicles fell by 1.6 percent m-o-m last month.
III. Market Situation
The currency pair EUR/USD rose moderately, correcting after Friday’s decline, which was triggered by an increase in investors' optimism about the tax reform in the U.S. following reports that the Republican Senator Marco Rubio will vote in favor of the GOP's tax reform bill. Mr. Rubio's support was in question prior to the reports after he said on Thursday that he would vote no on the bill unless it included a greater expansion of the child tax credit. The Republicans’ slim 52-to-48 majority in the upper chamber does not allow them to lose supporters before the most important vote of the month, expected on Tuesday. Today, market participants will continue to monitor the latest news on the U.S. tax reform prospects and will pay attention to the final estimated on inflation in the Eurozone and the U.S. housing market data as well. It is expected that harmonized index of consumer prices (HICP) in November rose 0.1 percent m-o-m and 1.5 percent y-o-y. As for the U.S. data, it is predicted that the NAHB housing market index in December remained at 70 points. Resistance level - $1.1876 (high of December 5). Support level - $1.1711 (low of November 21).
The currency pair GBP/USD rose slightly, retreating from an almost three-week low, helped by partial profit-taking by investors. Recall, on Friday the pair dropped more than 100 points on reports that British parliamentarians did not back Prime Minister Theresa May's Brexit plan as well as the statements of president of the European Commission Jean-Claude Juncker, who warned that second phase of Brexit negotiations would be a “significantly harder” process than the first phase. Mr. Juncker added that he thought the real negotiations on the second phase would start in March next year, but he could not say when these talks would be concluded. Meanwhile, president of the European Council Donald Tusk said it was “still realistic” to complete phase two Brexit talks by the October deadline but, noted that the next phase would be “more demanding, more challenging”. With an almost empty economic calendar ahead, investors will focus on the dynamics of the U.S. currency and the general market sentiment toward risky assets. Resistance level - $1.3465 (high of December 14). Support level - $1.3220 (low of November 28).
The currency pair AUD/USD traded noticeably higher, supported by favorable economic forecasts from the Australian government and growing copper prices. The Mid Year Economic and Financial Outlook (MYEFO), which was released today, showed the Australian government downgraded its budget deficit projections on higher corporate tax. The budget deficit is now expected to stand at AUD23.6 billion for 2017/18, some AUD5.8 billion lower than the level forecast in May’s budget estimate. Meanwhile, the deficit for 2018/19 was lowered to AUD20.5 billion from AUD21.4 billion projected in the budget. The budget balance is forecast to return to surplus in 2020/21. The updated projection surplus of AUD10.2 billion in 2020/21 is an improvement of AUD2.7 billion compared to May’s budget forecast. However, a lower forecast for wages is expected to weigh on personal income tax receipts.The Wage Price Index is forecast to grow by 2.25 percent in 2017/18 and 2.75 percent in 2018/19. MYEFO also noted that heightened competition in the retail sector and subdued rental price growth were expected to contain inflation. Overall, real GDP was forecast to grow by 2.5 percent in 2017/18, slightly below +2.75 percent in May’s budget. For 2018/19, the government retained the view that Australian real GDP would grow by 3 percent. Resistance level - AUD0.7699 (high of October 7). Support level - AUD0.7501 (low of December 8).
The currency pair USD/JPY consolidated near the opening level, due to the lack of new drivers. The pair’s performance was little impacted by the Japanese trade data. The Ministry of Finance of Japan announced that the country’s trade balance came in at a surplus of a JPY113.36 bln in November, compared to a downwardly revised surplus of JPY284.60 bln in October (originally JPY285.36 billion) and a surplus of JPY146.52 billion in November 2016. Economists had projected a JPY55.0 bln deficit for October. The report showed Japan’s exports increased slower than imports last month. Exports rose 16.2 percent y-o-y in November, following a 14.0 percent y-o-y climb in October, while imports surged 17.2 percent y-o-y last month, compared to an 18.9 percent y-o-y increase in a month earlier. Resistance level - Y113.74 (high of December 12). Support level - Y110.83 (low of November 27).
U.S. stock indexes closed higher on Friday, notching new all-time records, underpinned by a renewed faith in the tax overhaul in the U.S. The focus also was on the report on the industrial production for November. The Federal Reserve revealed that the U.S. industrial production rose 0.2 percent in November after an upwardly revised 1.2 percent m-o-m gain in October (originally a 0.9 percent m-o-m gain). Economists had forecast industrial production would increase 0.3 percent m-o-m. Excluding the post-hurricane rebound in oil and gas extraction, total industrial production would have been unchanged in November. Capacity utilization for the industrial sector increased 0.1 percentage point m-o-m in November to 77.1 percent.
Asian stock indexes closed higher on Monday, as investors’ sentiment was boosted by expectations the U.S. lawmakers will support the U.S. tax cuts aimed at stimulating growth in the world’s largest economy this week. The Japanese equity benchmark, the Nikkei, demonstrated the biggest rise in over a month, tracking a strong performance on Wall Street on Friday. A weaker yen provided support to the Japanese large export-oriented companies as well.
European stock indexes are expected to trade higher in the morning trading session.
Yields of US 10-year notes hold at 2.37% (+1 basis points)
Yields of German 10-year bonds hold at 0.31% (0 basis points)
Yields of UK 10-year gilts hold at 1.15% (0 basis points)
Light Sweet Crude Oil (WTI) futures traded higher. Crude oil for delivery in January settled at $57.66 (+0.58%). The crude oil prices rose slightly, supported by the Forties pipeline outage in the North Sea as well as the latest report from Baker Hughes, which showed that the number of active U.S. rigs drilling for oil fell by four to 747 during the week ended December 15. The drop follows increases over the last four weeks in a row. Meanwhile, the total active U.S. rig count, which includes oil and natural-gas rigs, also reduced by one to 930, as the gas rig count grew by three to 183 last week. The U.S. rig count is up 293 rigs from this time last year when it stood at 637.
Gold traded a $1256.20 (0.00%). Gold prices were flat due to the lack of new catalysts. At the same time, the decline in gold prices is limited by the dynamics of the U.S. currency. The index, measuring the value of the U.S. dollar relative to a basket of six major currencies, fell 0.11 percent to 93.83. Since gold prices are tied to the dollar, a weaker dollar makes the precious metal cheaper for holders of foreign currencies.
IV. The most important news that are expected (time GMT0)
Harmonized CPI ex EFAT
CBI industrial order books balance
Bundesbank Monthly Report
Foreign Securities Purchases
NAHB Housing Market Index
Westpac Consumer Sentiment
|remaining time till the new event being published|
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