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Uninspiring US dollar trading

The second day of the US dollar being neither hot nor cold despite the continued relatively positive streak of US data. It seems to be waiting for a signal. Donald Trump’s speech tomorrow and an event with Janet Yellen on Friday are potential candidates for making USD more vivid again. Equities were also calm today.

It is not that the US dollar simply loses against other G-10 currencies. It is not rallying any more, but still leaving a sense that further appreciation is possible. The main economic releases from the US this afternoon could be seen as disappointing, but on the other hand we are finally seeing a buildup of wholesale inventories. This could actually be another way that the positive business sentiment expressed in ISM and PMI indices among others is being translated to real data.

JPY was the strongest of the major currencies today, but with only 0.24% gain agains the passive US dollar. AUDUSD remained quite resilient (+0.14%) but we think this will change soon as it reached a crucial spot in its correction. It was interesting to once again see CAD stand against the decline of the price of oil. Technically USDCAD is standing on an important support level.

Two emerging currencies are in big trouble recently: MXN and TRY. Both saw losses exceeding 1.5% today despite efforts by their central banks to curb the depreciation.

Gold (+0.60%) and Silver (+1.87%) are two of the biggest gainers today as precious metals have added to recent gains. Gold now trades back up at levels not seen since late November.

Oil extended the large drop from yesterday. Iraqi oil ministry informed today that the reduction of oil output in the first days of January reached 160k barrels per day, while the OPEC agreement set the target for this country at 210k and the oil market is still betting on a disappointment with the ability of OPEC to control the fulfilment of the agreed output cuts.

More data from China came overnight. CPI was relatively soft, but PPI surged by 5.5% y/y  with expectations at 4.6% and prior growth of 3.3%.  Some see this as a signal that PBoC may see a need to tighten its policy this year, but stability issues still seem to dominate so the impact of inflation rebound on the monetary policy will be probably limited.

Still today at 9:30 pm GMT API will release its weekly report on US crude inventories. During the Asian session key points to watch are the data from NZ and AUstralian labor market and the Japanese bond auction.



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