Headlines:
- Not quite the 2022 theme this one
- Bavaria December CPI +9.2% vs +10.9% y/y prior
- Saxony December CPI +8.7% vs +9.9% y/y prior
- Germany December unemployment change -13k vs 15k expected
- UK December final manufacturing PMI 45.3 vs 44.7 prelim
- Switzerland December manufacturing PMI 54.1 vs 53.3 expected
- SNB total sight deposits w.e. 30 December CHF 539.2 bn vs CHF 542.7 bn prior
Markets:
- USD leads, AUD and NZD lag on the day
- European equities higher; S&P 500 futures up 0.4%
- US 10-year yields down 6.2 bps to 3.768%
- Gold up 0.6% to $1,834.68
- WTI crude down 0.9% to $79.71
- Bitcoin down 0.3% to $16,715
The day started off with a decent bid in the Japanese yen but that quickly turned into a rousing rally for the US dollar as European traders got to their desks. The backdrop in broader markets is a peculiar one though. The dollar is acting like there is risk aversion but there are no signs of that whatsoever in stocks and bonds – if the narrative from last year is anything to go by.
But it is after all the new year, and flow-based action is the one dominating the story today.
Most major currencies were little changed against the greenback but then fell sharply as the dollar caught a strong bid across the board. Of note, the euro, pound, franc, aussie and kiwi were all down over 1% against the dollar at one point and most still are.
EUR/USD fell from 1.0660 to 1.0520 while GBP/USD dropped from 1.2060 to 1.1900 before bouncing slightly to 1.1960 levels.
Meanwhile, AUD/USD declined sharply from 0.6800 to 0.6690 alongside NZD/USD, which plunged from 0.6330 to 0.6200 on the day.
USD/JPY was initially lower, keeping around 129.50 in the handover from Asia trading but jumped higher to turn positive and keeping closer to 131.00 currently.
The moves came even as equities hold higher, though S&P 500 futures have halved its gains as we look towards North America trading.
There’s still plenty to play for as the year is only just beginning, so strap yourselves in. It’s going to be a bumpy ride.
This article was written by Justin Low at www.forexlive.com.
