A Quiet Day on the Data Leaves the Spotlight on the GBP and the USD

Earlier in the Day:

Economic data through the Asian session this morning was limited Japan’s November trade figures. Japan’s trade surplus narrowed from ¥285bn to ¥113bn. Forecasts were for a ¥55bn trade deficit. Exports surged by 16.2%, following October’s 14% rise, while imports increased by 17.2% with the adjusted trade surplus widening from a revised ¥0.35tn to ¥0.36tn.

 

The Yen showed little response to the data, moving from ¥112.691 to ¥112.749 upon release of the figures, which continued to support the upbeat sentiment towards the Japanese economy.

 

Elsewhere, the Aussie Dollar was on the rise, up 0.18% to $0.766 at the time of writing supported by rising government bond yields, with the Kiwi Dollar gaining 0.29% to hit $0.7013.

 

It was a risk on session, with the equity markets on the rise, led by the Nikkei, which was up 1.46% at the time of writing, supported by the softer Yen and positive trade figures earlier in the session.

 

With the holidays looming and economic data on the lighter side through the week, market risk appetite and the direction of the Asian currencies against the Dollar will be hinged on noise from Capitol Hill through the week.

The Day Ahead:

 

Economic data out of the Eurozone this morning is limited to November’s finalized inflation figures, which are not expected to have a material impact on the EUR, with finalized numbers forecasted to be in line with prelim figure released at the end of last month.

For the EUR to get a boost from the numbers, core inflation will need to get a considerable bounce, with the annual rate of inflation sitting at just 0.9% year-on-year according to prelim figures. The ECB has been quite vocal of its focus on the core figures, which continues to fall well short of the ECB’s objective.

At the time of writing, the EUR was up 0.10% to $1.1761, with direction through the day likely to be from Capitol Hill than this morning’s data.

Across the Channel, the Pound has managed to avoid a dive through the early part of the day, with the British government gearing up for the next phase of negotiations with Brussels. High on the agenda will be trade and the strong words have already been hitting the wires from the EU’s chief Brexit negotiator who was reported to have said that Britain must face the consequences of Brexit and that there is no way that Britain will be able to negotiate a customized trade deal.

The British PM is scheduled to meet with MPs to discuss the next phase of negotiations later today, which could lead to some pressure on the Pound should the Tory rebels continue to make Theresa May’s life difficult.

On the economic data front, stats are limited to December’s CBI Industrial Trend Orders, which will likely be overshadowed by Brexit chatter through the day. At the time of writing, the Pound was up 0.10% to $1.3333

Across the Pond it’s a particularly quiet day on the data front, with no material stats scheduled for release. The lack of data will leave the markets focused on Capitol Hill, with U.S President Trump scheduled to speak on national security later in the day. Trump’s approach to foreign policy could see the Dollar under pressure, particularly if there is some finger pointing at other economic powerhouses during the speech.

Adding to direction for the Dollar will be any noise on the tax reform bill, which is now expected to get voted through mid-week, with the 2-week extension to avoid a government shutdown expiring on Friday also in focus.

At the time of writing, the Dollar Spot Index was down just 0.04% at 93.891, with the Dollar likely to be particularly sensitive to any negative noise on the tax reform bill vote this week.

Following the record levels hit by Dow, S&P500 and NASDAQ’s on Friday, the Dow futures are pointing to close to 100 point gain at the time of writing, with the Dow looking to make a move through to 25,000 before the end of the year.