23 Jan: Risk aversion rules following downbeat IMF outlook, US/China talks going nowhere fast. BOJ in focus today.

By | January 23, 2019

Risk aversion is the main theme in the financial markets on Wednesday following yesterday’s IMF warning about a likely global growth slowdown, led by China. The Yen has seen renewed demand, while the Aud$ and the Kiwi remain under pressure, although the Euro and Chf have been relatively stable. Bucking the trend, Sterling jumped to a 2-month high against the euro on Tuesday, after strong employment data suggested Britain’s labour market remained robust, despite an economic slowdown ahead of Brexit. In the other markets, US stocks ended the day down by around 1.5%-2%, WTI lost 2.25%, while Gold gained 0.4% on the back of some safe haven demand.

In terms of data, the US new home sales tumbled 6.4% in December to a three-year low of 4.99 mio (annualised pace), well below consensus expectations of -1.5%. The German/EU ZEW Economic Sentiment Survey was weak. German current conditions fell sharply to 27.6 (exp 43.0), the lowest level since Q1 2015. German expectations did rebound to -15 (exp -18.5) but remains close to recent lows over the past 5 months, which had not been seen since 2012. EU expectations were pretty much unchanged, at -20.9, but also remain around the lowest levels since 2012

In the UK, despite all the Brexit gloom, the November employment report was upbeat. Employment by 141k against average market estimates of 87k, while the headline unemployment rate slipped back to the low summer low of 4.0% (from 4.1%), the lowest level recorded since the mid-1970’s.

The NZ CPI was just released and came in slightly higher than expected at +0.1%qq, sending the kiwi up a quick 30 pips to 0.6750.

Wednesday will get off to a busy start in Asia with the release of the NZ Q4 CPI (exp 0.0%qq, 1.8%yy), Japan Trade Balance and the BOJ Meeting/Statement. No change is expected to policy although the BOJ will release new economic projections and we may see downward revision in inflation estimates. After that it all goes rather quiet, with just the Preliminary EU Consumer Confidence for January and then the Richmond Fed Mfg Index and EIA Crude Oil Stocks Weekly Change from the US. Have a good day.

Economic data highlights will include:                                                                                                     

Wed: NZ Q4 CPI, Japan Trade Balance, BOJ Meeting/Statement, CBI Distributive Trends Survey,  EU Consumer Confidence, EIA Crude Oil Stocks Weekly Change, Richmond Fed Mfg Index

CURRENCIES
EURUSD: 1.1360
Res  1.1390  1.1410  1.1425
Sup  1.1335  1.1320  1.1300
USDJPY: 109.26
Res  109.50  109.70  109.90
Sup  109.00  108.75  108.50
GBPUSD: 1.2958
Res  1.3000  1.3030  1.3070
Sup  1.2935  1.2900  1.2870
USDCHF: 0.9971
Res  0.9990  1.0005  1.0025
Sup  0.9960  0.9935  0.9915
AUDUSD: 0.7120
Res  0.7140  0.7160  0.7175
Sup  0.7110  0.7095  0.7080
NZDUSD: 0.6750
Res  0.6760  0.6775  0.6790
Sup  0.6725  0.6706  0.6685
INDICES / COMMODITIES
S&P.fs: 2629
Res  2640  2665  2685
Sup  2610  2595  2575
DJ30.fs: 24400
Res  24475  24570  24650
Sup  24245  24150  24000
SPI200.fs: 5769
Res  5800  5820  5850
Sup  5750  5720  5705
XAUUSD: 1284
Res  1290  1295  1300
Sup  1280  1275  1270
XAGUSD: 15.34
Res  15.45  15.60  15.75
Sup  15.20  15.05  14.90
WTI.fs: 52.83
Res  53.55  54.20  55.00
Sup  52.00  51.20  50.35