Market Drivers February 10, 2017
Chinese Trade Data beats big
UK Data all upside
Nikkei 2.49% Dax 0.46%
Europe and Asia:
CNY Trade 51.35B vs. 47B
GBP UK Trade 10B vs. -11.5B
GBP UK IP 1.1% vs. 0.2%
GBP UK MP 2.1% vs. 0.5%
CAD Employment 8:30
USD U of M Final 9:55
The dollar continued to power it’s way higher in Asia session trade with USD/JPY hitting 113.85 before hitting some profit taking. The was no fresh news and the price moves were simply a follow through on the strong performance yesterday after President Trump suggested that a major tax policy reform was coming in a few weeks.
At this point, it’s too early to ascertain if Mr. Trump’s words will have any long term meaning or whether they were simply rhetoric intended to juice the market. For now, the dollar still remains in a corrective phase and until USD/JPY takes out the 115.00 figure to the upside, the move could still be viewed as a short covering squeeze.
With little on the US docket today except the final reading of U of M data, flows in FX are likely to be driven by other markets. The yields on the benchmark 10-year continue to creep higher, but the moves so far have been relatively contained. If the 10 year does push towards the 2.45% level, a USD/JPY run through the 114.00 figure is very likely.
Elsewhere the Trade data out of China beat expectations handily with exports rising by 15% and imports by 25%. Much of the surge may have been seasonal adjustments ahead of the Chinese New Year, but the data clearly shows that Chinese economy appears to be operating on all cylinders and the news helped to push Aussie higher though the pair stalled ahead of the .7660 level that has capped moves for several days.
In UK the news was positive as well with all the data, including UK Trade balance, IP and MP reports coming in much better than forecast. The results, however, are unlikely to make much of a dent in UK GDP given the volatility of the data, but it does suggest that UK economy continues to shrug off any Brexit concerns. Cable, which was lower in Asian session trading popped above the 1,2500 level on the news.
Finally, in North America today, although the US calendar is barren Canada will report its employment data. After a blowout figure last month, the market is anticipating a bit of a pullback with market projecting a contraction of -10K versus a print of 50K the month prior. Canadian labor data has beaten forecasts the last four months in row, and if today’s news proves to be another upside surprise, the loonie could drop towards the 1.3000 figure once more as traders will begin to tighten the Canadian fixed income curve.