25 Jan: ECB on hold but dovish. Euro loses ground. US$ generally firm. IFO in focus Friday.

By | January 25, 2019

The US$ is stronger against all counterparts today, with the Euro and the Aud$ taking the brunt of the move. The dollar has climbed to a 5 week high against the Euro after the ECB left rates unchanged and turned increasingly dovish, with Mario Draghi saying that economic risks have moved to the downside and near-term data is likely to be weaker than previously anticipated. Also not helping the Euro was a report that the German Economic Ministry is sharply downgrading its 2019 growth forecast to 1.0% from 1.8%. Ahead of the ECB announcement, the PMIs were generally softer than expected and were of no help to the Euro. The Aud has been unable to recover from yesterday’s news that NAB will raise mortgage rates, placing pressure on the RBA to cut official rates, and closed the session on its lows. Elsewhere US$Chf and US$Jpy were rangebound but firm, while Cable has also been choppy but also remains firm as the markets perceive that  the UK will avoid a no-deal Brexit.

In other markets, stocks in the US were mixed/flat, the metals unchanged and WTI was +1.2%, with traders growing concerned that the Trump administration is considering sanctions against Venezuelan oil in order to punish the Venezuelan government for rescinding diplomatic ties with Washington amid the current leadership crisis in Caracas.

In terms of data, the EU PMIs were disappointing although the Euro was initially unaffected, as traders were more focused on the ECB outcome. The Eurozone January flash manufacturing PMI came in at 50.5 vs 51.4 expected, while Germany was at 49.9 vs 51.5 expected and France at 51.2 vs 50.0 expected. The most alarming figure was Germany heading below 50 – i.e. into contraction mode. On the other hand the US Manufacturing PMIs improved to 54.5, above expectations of 54.2, doing the dollar no harm.

Friday will begin with the NZ Visitor Arrivals and the Tokyo CPI, while the highlight in Europe will be the German IFO Business Climate/Expectations. Later in the day, the December US Durable Goods Orders were due to be released but have been delayed due to the Government Shutdown.. Have a good weekend.

Economic data highlights will include:                                                                                                                  

Fri: NZ Visitor Arrivals, Tokyo CPI, German IFO Business Climate/Expectations, US Durable Goods Orders, New Home Sales, Monthly Budget Statement.

CURRENCIES
EURUSD: 1.1307
Res  1.1320  1.1340  1.1360
Sup  1.1290  1.1270  1.1250
USDJPY: 109.66
Res  109.85  110.00  110.25
Sup  109.40  109.20  108.95
GBPUSD: 1.3057
Res  1.3070  1.3090  1.3110
Sup  1.3040  1.3020  1.3000
USDCHF: 0.9967
Res  0.9985  1.0005  1.0025
Sup  0.9945  0.9925  0.9900
AUDUSD: 0.7094
Res  0.7100  0.7120  0.7140
Sup  0.7080  0.7065  0.7050
NZDUSD: 0.6760
Res  0.6770  0.6785  0.6800
Sup  0.6750  0.6740  0.6730
INDICES / COMMODITIES
S&P.fs: 2635
Res  2650  2665  2680
Sup  2620  2605  2590
DJ30.fs: 24501
Res  24525  24600  24670
Sup  24440  24365  24270
SPI200.fs: 5824
Res  5845  5895  5945
Sup  5780  5730  5685
XAUUSD: 1280
Res  1285  1290.00  1295
Sup  1275  1270.00  1265
XAGUSD: 15.30
Res  15.45  15.60  15.75
Sup  15.20  15.05  14.90
WTI.fs: 53.24
Res  53.45  53.95  54.45
Sup  52.70  52.25  51.80