This Asia session is a follow up of the more hawkish minute of FOMC in the U.S. session. Not only the possibility of rate hikes come earlier, running off of the Fed's balance sheet is mentioned for the first time since 2020, and it suggests a faster running off than previous QE practice. This sent ripples throughout the market leading to lower equities and higher treasury yields, while the FX market takes queues from both. There are a slate of headlines from the globe on COVID alert, including China, Australia and UAE. Also, Kim is shooting missles in N.Korea, which obviously does not calm the market sea.
On the data front, we have Australia Markit Services came in at 55.1 and Composite 54.9 PMI for December, citing strong input price inflation. However, the data is not in the driver's seat this session.
Antipodeans lost significantly for the session with Aussie leading the losses, AUD/USD dropped to 0.7172 from 0.7222, AUD/JPY dropped to 83.12 from 83.88. NZD/USD dropped to 0.6753 from 0.6796, NZD/JPY dropped to 78.28 from 78.92. USD/CAD followed the retreat of oil to 1.2797 from 1.2749.
USD/JPY dipped to 115.83 from 116.18, amid higher yield but bleeding equities. Sterling back to familiar levels against the USD at 1.353.
Euro survived the day with a hair cut.
The USD fell back early in the US session, despite initially gaining after the stronger than expected ADP employment data. Initially, EUR/USD slipped back slightly to 1.13 after the data before resuming gains to 1.1345. The USD was also weaker against the riskier currencies, but USD/JPY recovered to near 116 after falling below in Europe. EUR/CHF also recovered through the session, coming close to getting back to 1.0390 to reverse Tuesday’s losses. GBP/USD tested 1.36, as EUR/GBP touched below .8340.
The ADP data was the only news of note in the US morning. December’s 807k surge in ADP’s estimate of private sector employment was the strongest since May and argues that an unexpectedly soft 210k increase (235k private) in November’s non-farm payroll is unlikely to be repeated, even if ADP data significantly outperforms again.
The afternoon focus was on FOMC minutes, which proved hawkish, seeing the possibility of rates being increased sooner and faster than previously thought. This lifted UST yields and the USD. With equities slipping the commodity currencies took the biggest hits, AUD and CAD more than fully erasing previous gains versus the USD, though AUD/USD held above .72. EUR/USD slipped back to near, but not below 1.13 while GBP/USD fell to around 1.3550. With equities slipping USD/JPY gains were modest, unable to return to 116.20.
00:30 GMT - AU: Composite PMI (Dec F) 54.9A
00:30 GMT - JP: Composite PMI (Dec F) 52.5A (Prev: 51.8)
00:30 GMT - JP: Services PMI (Dec F) 52.1A (Prev: 51.1)
Data to come
07:00 GMT - DE: Factory orders MoM WDA (Nov) (Mkt: -1.1% Prev: -1%)
07:00 GMT - DE: Factory orders YoY (SA) (Nov) (Mkt: 2.2% Prev: -6.9%)
09:30 GMT - UK: CIPS / Markit Services PMI (Dec F) (Mkt: 53.2 Prev: 53.2)
10:00 GMT - EU: PPI YoY (Nov) (Mkt: 22.9% Prev: 21.9%)
10:00 GMT - EU: PPI MoM (Nov) (Mkt: 1.1% Prev: 5.4%)
13:00 GMT - DE: HICP (Dec P) (Mkt: 5.6% Prev: 6%)
13:00 GMT - DE: CPI (Dec P) (Mkt: 5.1% Prev: 5.2%)
13:00 GMT - DE: HICP (Dec P) (Mkt: 0.2% Prev: 0.3%)
13:00 GMT - DE: CPI (Dec P) (Mkt: 0.4% Prev: -0.2%)
13:30 GMT - CA: Trade Balance (Nov) (Mkt: 2.03Bn Prev: 2.09Bn)
13:30 GMT - US: Trade Balance (Nov) 4cast: -81.1Bn (Mkt: -80.9Bn Prev: -67.1Bn)
13:30 GMT - US: Initial Claims (Jan 1) (Mkt: 195K Prev: 198K)
15:00 GMT - US: Durable Goods Orders (Nov F) (Mkt: 2.5% Prev: 2.5%)
15:00 GMT - US: Factory Orders (Nov) (Mkt: 1.5% Prev: 1%)
15:00 GMT - US: ISM Non-Manufacturing (Nov) 4cast: 67 (Mkt: 67 Prev: 69.1)
15:00 GMT - US: Durables Ex Transportation (Nov F) (Prev: 0.8)
23:30 GMT - JP: Real Household Spending (Nov) (Mkt: 1.2% Prev: -0.6%)
23:30 GMT - JP: Tokyo CPI (Dec) (Mkt: 0.7% Prev: 0.5%)