Daily Market Outlook, February 9, 2022 Overnight Headlines Biden Is Set To Meet With Utilities In New Push For Climate Spending House Passes Short-Term Government Funding Bill, Sends To Senate US Lawmakers Move Closer To Agreement On Russia Sanctions Bill Fed’s Daly Warns US Inflation Could Get Worse Before It Gets Better Fauci Declares Full Blown Pandemic Phase Of Covid Is Nearly Over ECB’s Villeroy Suggests Markets May Have Overreacted To The ECB UK PM Promotes Rees-Mogg To Brexit Role In A Nod To Tory Right BoJ Holds Fire, Sticks To Bond Buying Plan As Yields Test Upper Limit BoJ’s Nakamura: China’s ‘Zero-Covid’ Curbs May Hurt Global Growth Australian Consumer Sentiment Drops On Mounting Rate Rise Fears Oil Prices Nudge Up After API Data Shows Surprise Drop In US Stocks Hong Kong Hang Seng Index Surges As Chinese Tech Stocks Bounce The Day Ahead Risk appetite improved during the Asian trading session. Japan’s Nikkei-225 closed over 1% higher and stocks were also up in China, supported by reports that state-backed funds intervened in the market. US Treasury yields were slightly lower, having risen close to 2% yesterday. Overnight, the US Federal Reserve’s Mary Daly said that she favours a March hike, but also said that policy should not be ‘overly aggressive’. Yesterday, the ECB’s Villeroy indicated that markets may have overreacted to the hawkish tone in last week’s policy update. Central bank speakers will be the primary focus for today in the absence of major data releases. Italian industrial production for December is the only release of note and is seen reversing some of the prior month’s strong increase. More broadly, with Eurozone growth expected to bounce back in the months ahead and inflation surprising on the upside, the tone of last week’s ECB policy update was noticeably more hawkish. President Christine Lagarde, however, tempered that earlier this week, saying that any policy adjustment will be ‘gradual’. ECB Executive Board member Schnabel takes part in a Twitter Q&A today. The spotlight for sterling markets will be on Bank of England Chief Economist, Huw Pill, who is scheduled to speak on ‘the UK monetary policy outlook’ at the Society of Professional Economists annual conference. Pill voted with the majority last week in favour of a 25bp rate rise to 0.5%. Financial markets have priced in at least 150bp of hikes to 1.75% in total for this year, so it will be interesting to hear from him whether inflation risks warrant such expectations. Other central bank speakers today include the US Federal Reserve’s Loretta Mester, a voting member of its interest rate setting Committee this year, who is on the more hawkish end of the policy spectrum. Last week’s January payrolls data surprised on the upside (rising by 467k) and there were significant upward revisions to prior months, all of which suggest stronger jobs growth momentum heading into and during the Omicron wave. The Fed remains on course to raise interest rates by at least a quarter point next month. Tomorrow’s January CPI report will be closely watched and is expected to rise to a forty-year high. US 10-year Treasury yields eased back slightly overnight to 1.93% after peaking at nearly 1.97% yesterday. The UK 2-year gilt yield closed at 1.33%, the highest for over a decade.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls ) EUR/USD: 1.1295-05 (420M), 1.1310-20 (667M) 1.1350-55 (515M), 1.1450 (265M), 1.1475 (200M) 1.1550 (216M) USD/JPY: 113.75-80 (575M), 114.00 (456M), 114.50-55 (850M) 115.00 (725M), 115.20-30 (600M), 115.34-35 (410M) 115.50 (491M), 115.60 (326M), 115.75-80 (1.4BLN) 116.00 (292M), 116.50 (350M), 117.00 (491M) EUR/CHF: 1.0500 (705M) USD/CAD: 1.2675-85 (556M), 1.2720-30 (855M), 1.2760 (250M) AUD/USD: 0.7150-55 (310M), 0.7160-70 (890M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above EUR sees some bounce in Asia as USD eases back, EUR/USD 1.1412 to 1.1432 Effects of more dovish ECB talk discounted, ECB to still hike this year EUR/USD back in 1.1316-1.1439 daily Ichi cloud, near 1.1421 100-DMA Hourly charts shows spot between 1.1423 100-HMA, 1.1435-47 hourly cloud No major option expiries in area today but massive nearby tomorrow Tomorrow 1.1420-65 total E1.4 bln, more below, above at 1.1500 E1.5 bln EZ yields off highs yesterday but remain relatively firm Bund 10s @0.240%, OAT 10s @0.693%, BTP 10s @1.823% – TradeWeb EUR/GBP sideways, 0.8426-28, EUR/JPY off some from highs, 131.78-132.06GBPUSD Bias: Bearish below 1.36 Bullish above. Bid as U.S. yields slip and USD eases +0.15%, with the USD softer, at the top of an active 1.3542-1.3566 range Johnson reshuffles team in move to rescue his administration Modest changes to PM’s inner circle unlikely to change public perceptions Charts; momentum studies 5, 10 & 21 day moving averages conflict 21 day Bollinger bands edge lower – neutral setup suggests range trading 1.3462 61.8% Jan-Feb bounce and 1.3657, 76.4% 2022 fall pivotal levels Yield differentials may drive sterling’s next moveUSDJPY Bias: Bullish above 114.50 Bearish below USD/JPY and JPY crosses up some early before some ease back Position adjustments tipped, also Japan exporter, other sales up top Asia to 115.69 EBS early, tops 115.68 double January 11 and 28 Off since however to 115.32, upside maybe limited into US CPI tomorrow Option-related sales tipped 115.50+ too, today $1.4 bln expiries 115.75-80 Good support below too though, $1 bln option expiries between 115.20-35 Another $725 mln at 115.00 strike below too Firm US yields supportive, Tsy 10s off 1.970% high o/n but still @1.939% JPY crosses also off from early highs but still relatively buoyant EUR/JPY 132.06 to 131.78 EBS, GBP/JPY 156.28-69, AUD/JPY up, 82.41 to 82.65 Japan money supply continued steady rise in Jan, reflects easy BoJ policyAUDUSD Bias: Bearish below 0.7250 Bullish above AUD/USD to tackle chart ceiling as Australia set to reopen AUD/USD ready to take on key chart resistance 0.7183 Would open possibility of 38.2% Fibo at 0.7208 being tested Just above that barrier is the Bollinger uptrend channel Positive Asia stocks, Australia border reopening lift AUD Qantas sees strong demand for inbound flight
Source: Tickmill
