This Week's Five Highlights
* Equities see signs of life; some US data is a little better
* Brexit the concern in the UK as data comes in mixed
* What oil deal? Lots of talk but little sign of real action
A generally better week for 'risk appetite' with some recovery seen in equity markets and no untoward excitement on China's return from the week long New Year holiday. In the bigger picture equities remain deep in negative territory over the year to date, but we did see a combination of more dovish comment from Fed officials and some more encouraging data from the US, industrial production seeing a are improvement, while initial claims came in lower too for payroll survey week . It's hard to put a label on the USD overall as we again saw some individual currency moves.
The week started with weaker than expected GDP from Japan, and the Nikkei generally struggling to match some of the equity market gains elsewhere and USD/JPY generally quite heavy with added weight from GBP/JPY sales early in the week, while EUR/JPY was pushing it lower later on. We heard some complaints from MoF officials against 'rough' FX moves - FinMin Aso the latest, but no obvious signs of intervention yet and we have yet to see low at 110.98 seen earlier in the month revisited.
EUR/USD has drifted lower over the majority of the week, expectations of another deposit rate cut from the ECB in March now seemingly a matter of how much it will cut by rather than whether at all. However, the big support level at 1.1060 from Mid December is holding out so far. The ZEW survey was the bigger Eurozone release of the week and disappointed with the headline only just holding in positive terr itory.
In the UK the long stare was on the EU-UK negotiations later in the week. We saw some mixed data, the claimant count falling more than expected but alongside disappointing earnings, while Friday saw the biggest m/m rise in UK retail sales for nearly two and a half years. GBP started the week lower but while seeing some 'interesting' intraday price action has been relatively steady over the balance.
Volatility in oil prices remains a big feature, the CAD as ever going along with it, the focus on WTI now very much on the $30 level. A reasonable week for the AUD was dented by disappointing employment data, while the RBA's Edwards on Friday said that he would be happier with AUD/USD at .65. NZD traders saw another soft GDT dairy auction (if not as soft as expected), the NZD already under pressure from lower RBNZ inflation forecasts.
The Riksbank became the latest central bank to find its currency strengthening shortly after a rate cut that was at least partially aimed at doping just that. EUR/SEK is back below 9.40.
Still to come:
We expect U S January CPI to post a 0.1% decline. The core rate ex food and energy is a close call between 0.1% and 0.2%, though we lean to the higher side.
Canada also sees CPI, expected to pick up to 2.0% y/y from 1.6%, catching up with the core where we expect a rise from 1.9% to 2.0%. December retail sales are due at the same time, likely to reverse most of November's strong 1.7% gain with a 1.5% m/m fall.