Over the weekend we had comments from Federal Reserve Board Governor Adriana Kugler along with Federal Reserve Bank of San Francisco President Mary Daly saying that while progress had been made on bringing down inflation there was still work to be done. The assessment seemed to weigh on gold during the session here, keeping it under US$2650.
The impact on FX, though, was hard to pinpoint. EUR, AUD, NZD, GBP all rose.
CAD responded more to an indication that Canadian Prime Minister Justin Trudeau appears likely to step down. An announcement could come as soon as Monday. USD/CAD dropped under 1.4400.
USD/JPY was a mover, to highs just over 157.80. Today was the first session of the year for Japanese markets after holidays on January 1, 2 and 3. Data from Japan today were Services (up from November) and Composite (down from November) PMIs, a bit mixed. Bank of Japan Governor Ueda spoke but did not give a clear indication of rate hike timing to come. Dai-ichi Life company’s president, Toshiaki Sumino, expects a BoJ rate hike this month (the BoJ meet January 23 and 24).
China was interesting. On Friday USD/CNY crossed above 7.3, leading to much speculation that the People’s Bank of China was trimming back its support for yuan and that Monday’s reference rate fixing would be above 7.2. Indeed, USD/CNY climbed above 7.3275 (CNY hit a 16 month low). The People’s Bank of China, however, set the USD/CNY reference rate at 7.1876, well under 7.2. Further, a PBOC-backed newspaper, Financial News, reaffirmed the central bank's "resolute" support for the yuan. News also that the PBOC is set to issue a record volume of offshore yuan bills in Hong Kong this month, aiming to stabilize the yuan's exchange rate amid the growing pressures. Issuing offshore yuan bills is a strategy for absorbing excess liquidity in the offshore market, reducing downward pressure on the currency.
Data from China today was the Caixin Services PMI, reported at a 7 month high of 52.2 (vs. expected 51.7 and November’s 51.5). Composite dipped to 51.4, from November’s 52.3, weaker manufacturing output slowed overall growth to its lowest level since September.
Trump yelled out his main policy planks once again today:
This article was written by Eamonn Sheridan at www.forexlive.com. Read More Details
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