Greenback rallies against majors

Markets ended last week on a positive note with the post-FOMC meeting bid tone continuing to resonate through the globe.

US Dollar
Source: Bloomberg

The rebound in oil prices also helped underpin sentiment to an extent. While equities drifted higher, there were some notable moves in the fx space with the greenback gaining significant ground against the euro and yen. EUR/USD plunged to $1.222, breaking below its early December lows and now trading at its lowest since July 2012. The main event for Europe this week will be Greece’s second attempt to elect a president, failure to do so could see pressure mount on the single currency.

 

 

Big week for Japan

Meanwhile USD/JPY extended its gains in the aftermath of the Bank of Japan meeting and now seems to be heading back to the ¥120.00 mark. Remember we hit ¥121.85 on December 7 and that’s the level to look out for. Heading into the minutes from Friday’s BoJ meeting and Kuroda’s speech which both hit the wires middle of this week, yen weakness is likely to persist. While the BoJ didn’t ease further on Friday, Japan releases revised inflation forecasts in January and also announces the new cabinet. From an inflation side of things, weaker oil prices are expected to force some lukewarm projections. The new cabinet is likely to be very strategic incorporating Abe’s economic agenda. We’ll get a better indication of Japan’s inflation when the country releases CPI readings on Friday. As a result, there is plenty out there to keep the yen offered and Japanese equities bid. It looks like the Nikkei will lead the way for Asia today as it is currently pointing up 0.6%.

ASX 200 to extend gains

China will also remain in focus after a recent spike in interbank rates caused some concern and put pressure on equities. The country is pushing on with its reforms and announced it will ease rules on branch openings and yuan transactions by foreign banks. Today China will release November commodity and energy trade data. This will be interesting given the recent moves in energy prices.  

The ASX 200 is likely to extend its gains today and we are currently calling it up 0.7% at 5363. The rebound in oil and iron ore will be key for the local market as investors look for some ‘bargains’ in the resource space. It’s also an interesting time for gold as Russia bolsters reserves to fight the slide in the ruble. Apart from that, it’s very quiet on the company news front. Another positive is the fact AUD/USD looks like its gearing up for a leg lower. The $0.8100 mark is likely to come under threat with the pair currently in a firm downtrend.

 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.