· Asian currencies inched higher on Thursday supported by hopes the U.S.-China trade deal could herald warmer relations between the world’s two biggest economies and help to revive global growth.
“The message is actually very, very simple: Tariffs are not going up this year. And that’s really all we need,” said Ken Peng, Citi’s head of Asia investment strategy.
That put the New Zealand dollar on track for its first intra-day rise in a week and the kiwi’s 0.2% lift led small but broad-based gains. It last traded at $0.6635.
The Chinese yuan, the most sensitive currency to the U.S.-China trade relationship, drifted back toward a six-month peak hit on Tuesday, adding 0.1% to 6.8842 per dollar.
The safe haven Japanese yen was a fraction softer at 109.92 per dollar, while the Australian dollar held a tad firmer at $0.6908.
The greenback was also marginally lower against the euro and pound, with analysts figuring a bounceback in the world economy could be negative for the dollar.
Against a basket of currencies the dollar sat at 97.195, close to a week low.
· “I’m not sure that there’s any hidden gold nugget,” said Westpac FX analyst Sean Callow.
“There’s a sense of markets having traded off the positive vibes of the trade agreement for long enough, and it’s very hard to see where the upside is from here,” he said.
“If there is a step towards freer trade and lower tariffs, then it’s obviously not going to happen anytime soon.”
· Here are the most important things to know about Thursday before you hit the door.
1. Morgan Stanley set to report
The nation’s fourth-largest bank reports fourth quarter earnings before the bell on Thursday. Barclays is expecting Morgan Stanley to report earnings of $1.08 per share, compared to the 80 cents per share earned in the same quarter last year. The firm expects Morgan Stanley’s total revenue to come in at $40.287 billion, compared to the $40.107 billion earned in the fourth quarter of 2018.
2. Retail sales
We’ll get a read on the health of the U.S. consumer on Thursday when the Commerce Department releases December retail sales. December is one of the busiest months of the year for retail with the holiday shopping season, but retailer Target’s stock fell 7% on Wednesday after reporting disappointing holiday sales results. The big box retailer showed weakness in the toy and electronics categories.
3. Manufacturing gauge
We’ll get a read on the strength of the manufacturing sector when the Philadelphia Federal Reserve’s manufacturing index for January comes out on Thursday.
· The United States has signed a partial trade agreement with China. But that doesn't mean simmering conflicts and uncertainty over trade won't drag down the global economy this year.
Tensions between the world's two biggest economies are likely to persist in 2020 as Beijing and Washington enter a second round of trade talks that are expected to be more difficult than the "phase one" process that culminated in a deal Wednesday in Washington.
The European Union is also locked in its own trade dispute with the United States that has strained ties between the preeminent western powers. And the United Kingdom's looming break with Europe brings with it a slew of challenges as the country attempts to forge a new relationship with its largest export market.
· The long-awaited U.S.-China trade deal touted new wins for U.S. companies looking to access China’s $40 trillion financial sector, but many of the changes were already in the works with Beijing stepping up the pace of opening up in the past year.
Under the deal, China has agreed to expedite by nine months a previous December 2020 deadline for removing foreign ownership caps on securities firms, which includes investment banking, underwriting and brokerage operations.
· The U.S. economy expanded at a modest pace through the final six weeks of 2019 but uncertainty over U.S. trade policy continued to hurt firms, a survey conducted by the Federal Reserve said on Wednesday.
“In many districts, tariffs and trade uncertainty continued to weigh on some businesses,” the Fed said in its report, compiled from anecdotal evidence derived from business contacts across the country.
· The Bank of Japan is expected to keep monetary policy steady next week and nudge up its economic growth forecast, as the U.S.-China trade deal and de-escalation in Middle East tensions take some pressure off the central bank for more stimulus.
But BOJ Governor Haruhiko Kuroda will likely voice his resolve to keep monetary policy ultra-loose as the economy continues to feel the strain from the trade war and October’s sales tax hike.
At the two-day rate review that ends on Tuesday, the BOJ is set to keep its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%.
Under current projections made in October, the BOJ expects the economy to expand 0.7% in fiscal 2020 and 1.0% the following year.
Oil prices rose on Thursday buoyed by the long-anticipated signing of an initial Sino-U.S. trade deal that sets the stage for a jump in Chinese purchases of American energy products, while U.S. crude inventories fell more than expected.
Brent LCOc1 was 30 cents, or 0.5%, higher at $64.30 a barrel by 0754 GMT, while U.S. crude was up by 30 cents, or 0.5%, at $58.11 a barrel.
· WTI bounces back beyond $58.00 following upbeat stockpiles, mixed headlines
WTI stays mildly bid while taking the rounds to $58.25 during the early Thursday. The black gold recently recovered after the weekly report from the US and the US-China phase-deal signing in ceremony. Though, mixed trade/political news limit the oil benchmark’s upside.
Technical Analysis
Buyers will look for entry beyond $59.00 while aiming for 38.2% Fibonacci retracement of the October-January rise, at $60.15. Meanwhile, sellers will target downside break of 200-day SMA level of $57.75 to aim for 61.8% of Fibonacci retracement, at $56.70.
Reference: Reuters, CNBC, FXStreet, CNN
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