Posted on: 07 January 2016, by: Pepperstone S – Market Review
Brace yourself for a string of news that may continue to play out negative for G10 commodity and EM FX:
WTI settled at the lowest level since January 20, 2009 of 33.97. RUB was the worst performing currency, while CAD losses were capped by 1.4100 resistance.
Geopolitics continued to show a divide between Saudi, its allies and Iran. Meanwhile, tensions are high of North Korea’s claims, despite the White House not believing it.
US data was solid. The market’s slightly dovish read of the FOMC minutes may have provided balance but Vice Chair Stanley Fischer’s interview likely carried more weight than the dated document. Fischer says the market is underpricing the pace of hikes in 2016.
Consensus on USDCNY is that the fixing strength will continue.
JPY remained the safe haven of choice
US equities continued to slump, on all these factors plus any indications from news regarding major companies that global demand should be questioned.
Getting back to US data and events, it was all positive on balance. The main takeaway: NFP expectations of 200k are supported, with upside risk. In order of release:
US ADP rose by 257k in December versus just 198k expected. Prior month saw a small revision of 211k. Looking at the details, Large and Small firms led gains with +97k and +95k respectively. As expected, services comprised most of the gains at +234k.
US ISM nonmanufacturing index remained strong in December, holding slightly above 55. There was strength in business activity (58.7) and new orders (58.2). The employment index, which tends to coincide with services payroll trends, edged up to 55.7.
US deficit at USD42.37 versus 44bn expected and 43.89 prior. Even Canada also best expectations. Deficit at CAD1.99b versus 2.6bn expected and 2.76bn prior.
US durable goods final for November was not revised from 0.0%. Ex transportation and nondefense, revised by 0.1% higher. Some expected negative revisions.