Archives of “January 2020” month

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Offshore Chinese yuan falls to fresh six-week low against the dollar

  
Analysis, Forex

USD/CNH rises to the highest level since 20 December amid virus concerns

USD/CNH D1 30-01

When China sneezes, the rest of the world catches a cold – in this case, quite literally. As coronavirus concerns continue to grip markets, it is putting pressure on the offshore yuan as it falls to its weakest levels against the dollar since 20 December.
USD/CNH is closing back in on the 7.00 threshold and a break of that level may yet set off further risk aversion in markets – more specifically, emerging markets in Asia.
As Asian markets continue to be battered by fears surrounding the situation and the economic backlash set to come as a result of China being impacted, the dollar reigns as king in the region – and that may yet continue for quite some time yet.

Nikkei 225 closes lower by 1.72% at 22,977.75

  
Analysis, Global Indices
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The Nikkei falls back below the 23,000 mark

Nikkei 30-01

Fears surrounding the coronavirus outbreak continue to reverberate across markets and risk trades are largely suffering as a result. The fact that Facebook earnings wasn’t good enough – slower growth and profits guidance – only adds oil to the risk-off fire today.

US futures are down by 0.5% while Treasury yields are marked lower across the board following a sharp drop yesterday. 10-year yields are now at 1.568%, down by 1.5 bps.
As a result of the softer risk mood, USD/JPY is sitting around 108.92 currently – with focus turning to the 100-day moving average @ 108.75 once again.

Here are all the changes in the FOMC statement (blink and you’ll miss it)

  
  Analysis
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This is how the statement from the Federal Open Market Committee changed in January from December.

Sheesh. Not much. What there is is slightly more dovish (but its a bit of a hair-split isn’t it?)
This is how the statement from the Federal Open Market Committee changed in January from December. 

Death toll in China from the coronavirus is now at least 169

  
  Analysis
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Hubei province has reported a further 37 deaths

Via Hubei’s province Health Authority (figures as of the end of the day Jan 29):
  • total confirmed cases in Hubei is 4,586 ( up 1,032 from the previous day)
  • 162 deaths
  •  4,334 hospitalized cases, of which 277 are in critical condition
Wuhan is the city at the centre of the outbreak, a city in Hubei province.

Fed Powell press conference highlights

  
  Analysis
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Feds Powell conducts press conference after January 2020 interest rate decision

Fed's Powell
  • Fed wants to avoid misinterpretation with inflation wording
  • Not comfortable with inflation persistently under 2%
  • Want to signal not comfortable with prices below goal
  • We expect Bill purchases to make reserves ample in 2nd quarter
  • Fed will know when adjustments have run course when reserves are durably at a sustainable level
  • At some point the Fed will raise minimum bid rate on repos
  • reserve levels will have to be at a level high enough to remain ample. 1.5 trillion will be the bottom end of the range
  • he expects reserve fluctuation particularly around tax season
  • Fed will provide more details and will keep the process a smooth one
  • Fed’s attention is just to raise the level of reserves. That is our sole intention
  • Asked if Bill buying is QE , he says many things affect financial markets.
  • Most forecasts underestimated labor participation gains
  • Labor market continues to perform well
  • Labor wages have moved from about 2% to 3% currently
  • It is a bit surprising that wages haven’t risen more given such low unemployment

Market reaction:

  • Gold has moved to new session highs at $1575.84
  • US rates have moved lower with the 10 year falling to 1.5942%
  • NASDAQ index up 47 points at 9316.69. S&P index up 11.3 points (was up 13 points)
  • EURUSUD moved to New York session highs at 1.1015.  A trendline on the hourly chart is just ahead at 1.1017 and the falling 100 hour moving average is 1.10232
EURUSD looks to test topside trend line and falling 100 hour moving average

  • USDCHF is moving toward session lows.  Markets trading at 0.9728 from 0.9743. USDJPY moves lower as well (109.10 currently from 109.20).
More from Powell presser:
  • virus is a serious issue, significant human suffering
  • coronavirus likely to disrupt activity in China, maybe world
  • very uncertain about how far virus will spread
  • Fed’s carefully monitoring situation around coronavirus
  • sees grounds for cautious optimism on global economy
  • supportive financial conditions, trade tensions easing and lower odds of hard Brexit all contributed to more positive outlook
  • We will continue to adjust IOER as appropriate to help move the effective rate for the middle of the range
  • there is no current urgency to make decision on standing repo facility
  • over the long term it is possible there is a financial stability risk from climate change
  • in the very early stages of the impact from climate change
On China and USMCA
  • Phase 1 deal with China and USMCA is without question positive and should support the economy over time
  • Trade policies uncertainty remains elevated
  • Still have 2 or 3 active trade discussions going on at the moment
  • There is a wait and see attitude for businesses on trade
  • We need to be patient on trade deals economic impact
  • Does not yet see a decisive recovery for manufacturing
There is some modest moves to the downside in stocks and the USD has tilted to the downside (3:04 PM ET):
  • S&P index up 6.5 points
  • NASDAQ index up 32 points
  • The USD has ticked lower through the presser on a modest basis.
More from the Powell press conference:
  • We don’t think there is imminent risk on Chinese debt
  • Fed sees asset value valuations somewhat elevated, but not extreme
  • household that is in a good place
  • business debt is rising but not threatening stability
  • vulnerabilities to financial stability is moderate overall
Press conference ends at 3:23 PM ET.
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