Action Insight

Sterling jumps after BoE stands pat and indicates that it may raise interest rates earlier than expected. In the accompanying statement, the central bank noted "were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target." That is seen as the main trigger for the buying in the Pound. Other than that, there are many surprises. The votes on keeping the Bank rate at 0.50% and asset purchase at GBP 435b were unanimous. 2018 GDP forecast was raised to 1.8%, up from 1.6%. 2019 GDP forecast was raised to 1.8%, up from 1.7%.

As widely anticipated, RBNZ left the OCR unchanged at 1.75%. Owing to the downside surprise in 4Q17 inflation, policymakers revised lower their inflation forecast, mainly driven by tradeable inflation. Meanwhile, the central bank now sees currency appreciation a less concern, as NDZUSD has retreated to a one-month low, and indicates that the positive impacts of fiscal stimulus (including KiwiBuild and the increase in minimum wages) have diminished. The overall monetary stance remains neutral with the first hike unlikely coming before the 2Q19.

The global markets turned into consolidative mode, digesting recent losses. DOW attempted to rebound to 25293.96 but closed down -0.08% at 24893.35. Nikkei is trading up 0.35% at the time of writing but lacks follow through momentum. An important development to watch is that 10 year yield closed sharply higher by 0.076 at 2.845. Monday's high at 2.862 is now back in radar. And a strong break there will release recent up trend in yields, and could prompt another round of selloff in stocks. In the currency markets, Yen remains the strongest major currency for the week and is back pressing this week's low against Europeans. Dollar follow as the second strongest and has picked up from momentum overnight. New Zealand Dollar trades broadly lower after RBNZ stands pat and maintained a neutral stance. The Kiwi is so far the weakest one for the week.

Dollar is generally firmer today, except versus Yen as global markets stabilized. At the time of writing, DAX is trading up 0.8%, CAC 40 up 0.6% and FTSE up 0.8%. US futures point to a slightly lower open but loss will be limited initial trading. Euro is also mildly firmer as sup[ported by positive news from EU. On the other hand, Aussie and Kiwi are trading as the weakest ones. In particular, Kiwi is back under some pressure ahead of tomorrow's RBNZ rate decision.

Global market sentiments stabilized after steep early selloff. DOW initially dived to 23778.74 but rebounded to close up 567.02 pts or 2.33% at 24912.77. S&P 500 recovered 46.2 pts or 1.74% to 2695.14. NASDAQ also regained 148.35 pts or 2.13% to 7115.88. Asian markets followed with Nikkei trading up 660 pts or 3% at the time of writing. In the currency markets, Yen remains the strongest one for the week so far despite paring back some gains. Yen is followed by Kiwi and Dollar. Meanwhile, European majors remain the weakest, with Sterling leading the way down

Global stock markets selloff continues today. At the time of writing, all major European indices are trading in red. FTSE 100 is down -1.9%, DAX down -2.4% and CAC 40 down -2.7%. DOW just had the biggest single day point drop yesterday. US futures suggest the selloff is going to continue, at least in the early part of today's US session. In the currency markets, Dollar is trading broadly higher today, but overwhelmed by New Zealand Dollar. Yen follows closely as the third strongest today, but the strongest for the week. Notable weakness is seen in European majors

In its first meeting in 2018, RBA maintained the cash rate unchanged at 1.5%. The decision had been widely anticipated. As suggested in the accompanying statement, the central bank continued to see positive economic developments both globally and at home. Policymakers have turned slightly more upbeat over the domestic growth outlook, projecting GDP to expand 'a bit above 3% over the next couple of years'. Meanwhile, RBA revealed that the central forecast for CPI is 'a bit above 2% in 2018. This marks a more hawkish tone when compared with December’s language. While the job market has improved a lot, with the unemployment rate falling to the lowest level in 4.5 years, wage growth has remained lackluster. This has raised concerns over household expenditure.

Selloff of global stock markets intensified further as DOW scored the largest single day point drop in history overnight. DOW declined -1175.21 points or -4.6% to 24345.75, comparing to 26616 record high made just six trading days ago. S&P 500 closed down -113.19 pts or -4.1% at 2648.94. NASDAQ lost -273.42 pts or -3.78% to 6967.53. 10 year yield hit new 4 year high at 2.862, before closing down -0.60 at 2.794. In Asian markets, Nikkei follows by dropping more than -5.2% at the time of writing. Hong Kong HSI is down -4.3%. In the currency markets, Yen is trading as the strongest major currency for the week, followed by Dollar and then Swiss Franc. Sterling is the biggest loser, followed by Canadian and then Aussie Dollar.

Sterling is trading broadly lower today as weighed down by weaker than expected services data. Concerns over UK's own internal split regarding Brexit ne got it ion is also weighing down on the Pound. Nonetheless, loss is so far limited. GBP/USD is holding above 1.4, EUR/GBP well below 0.9828, GBP/JPY also well above 151.95 support. The key to Sterling's trend will remain on the BoE Super Thursday. Yen is trading broadly higher today as global stock market rout continues but the Swiss Franc doesn't follow. And indeed, Aussie and Kiwi follow as the next strongest ones

Global stock market rout extends into Asian session today. At the time of writing Japanese Nikkei is down -2.2% and Hong Kong HSI is down -1.6%. The currency markets are relatively mixed, though. Aussie and Yen are both trading mildly higher, but neither one display any sign of conviction. Dollar pares back some of Friday's gain. And the greenback is still looking bearish against Europeans. It's believed the current risk aversion is driven by the increasing expectation of global monetary stimulus withdrawal. And, such expectation intensified after the strong employment data from US. So far, commodities currencies are the biggest victim and Swiss Franc is the largest beneficiary of the theme.

Steep selloff in the global stock markets ended up as the biggest news last week. Some attributed the surge in global yields and stock market declines to the solid non-farm payroll report from US. The headline 200k growth confirmed underlying healthiness in the US job market. And more importantly 0.3% mom rise in average hourly earnings in January, following 0.4% mom rise in December, indicates pickup in momentum in wage growth. The case for Fed to hike three times this year looks more likely than ever. And subject to development, Fed could indeed hike the fourth time in December.

Dollar jumps in early US session after another set of solid employment data. Non-farm payrolls report shows 200k growth in January, above expectation of 180k. Prior month's figure was revised up by 12k to 160k. Unemployment rate was unchanged at 4.1% as expected. Average hourly earnings also grew 0.3% mom, in line with consensus. The recovery in greenback is broad based. But we'd like to point out that firstly, USD/JPY's break of 110.18 resistance is now seen as a sign of near term reversal. AUD/USD has topped out earlier this week and the post NFP decline also affirms the case of near term reversal. However, against European majors, Dollar is just in staying in range and the rebound might just be part of consolidation patterns.

Dollar is trading generally higher in early US session as markets await job data from US. But for the week, Dollar is clearly mixed. In particular, the greenback is under some selling pressure against European majors and Canadian Dollar. EUR/USD, with yesterday's rebound, is back pressing 1.25 handle. Markets are expecting 180k growth in NFP in January. Other employment related data supports this healthy NFP number. Focus will again be on wage growth as average hourly earnings are expected to rise 0.3% mom.

Dollar continues to trade mixed in today as markets are holding their bets ahead of tomorrow's non-farm payrolls report. Data from US today are positive. Initial jobless claims dropped 1k to 230k in the week ended January 27. Challenger job cuts showed -2.8% yoy decline in planned layoffs. But, also despite yesterday's slightly hawkish FOMC statement, there is no sign of sustainably buying in the greenback yet.

Dollar remains generally in range after getting some mild support from FOMC statement. While there was sign of building up of downward pressure prior to FOMC, it seems that traders are holding their bets ahead of Friday's non-farm payroll report. Price patterns in most dollar pairs suggest that they are turning into more prolonged near term consolidation. There is still no clear sign of reversal yet. Elsewhere in the forex markets are also mixed as the actions are mostly consolidative.

The FOMC voted unanimously to leave the Fed funds rate unchanged at 1.25-1.5% in January. There were some minor changes in the accompanying statement but the theme continues to suggest that that gradual removal of monetary stimulus remains on track. Policymakers eventually took out the impacts of hurricanes in its economic forecasts and continued to see 'solid' growth in' employment, household spending and business fixed investment'. Meanwhile, they acknowledged that core inflation has stopped declining, thus allowing them to maintain the view that inflation would strengthen this year then stabilize at around the 2% objective. The Fed reaffirmed the pledge to monitor the development closely. The market viewed the meeting outcome as slightly hawkish, sending Treasury yields modestly higher. CME’s 30-day Fed funds futures suggest that the market has now priced in 80% chance of rate hike in March, up from 74% before the announcement. Other barometers have suggested that chance of a March rate hike has increased to 90%.

Dollar weakens broadly in early US session despite solid employment data. In particular, USD/CAD leads the way with Canadian GDP meeting forecasts. The greenback will look into Janet Yellen's last FOMC announcement today. But it's unlikely for Dollar to get any support from there. The key level to watch is 1.25 handle in EUR/USD. It's close to 1.2494/2516 cluster fibonacci level. A firm break there would likely prompt broad-based selloff in Dollar.

China’s official manufacturing PMI slipped -0.3 point to 51.3 in January, compared consensus of 51.5, as almost all sub-indices dropped during the month. The non-manufacturing PMI added +0.3 point to 55.3, beating expectations of 55, in January. Note that the services sector contributes about 80% and construction sector contributes...

The forex markets remain generally in consolidation mode today. US President Donald Trump's State of Union address provides little inspiration. Nonetheless, the soft tone of Dollar in Asian session suggests that it might be ready to resume recent decline, probably subject to FOMC statement. In other markets, DOW dropped -362 pts overnight to close at 26076.89. The index has likely started the long overdued near term correction and should head lower, possibly back to 25000 handle. 10 year yield extended recent rally to 2.726, up 0.030, but again, provides little support to Dollar.

Dollar's recovery once again loses momentum today. Overall the markets are staying in consolidative mode. Eurozone GDP came in meeting expectations but provides little boost to Euro. It's seems that solid growth data from the region is becoming a norm. Meanwhile, Sterling also rebounds notably today even though political and Brexit news continue. For the moment, the markets are likely holding their breaths, waiting for US President Donald Trump's State of Union address in the upcoming Asian session, as well as tomorrow's FOMC announcement.