The Australian dollar enjoyed good two-way price-movements in Asia this Thursday, after upbeat Australian capex figures pushed the AUD/USD pair to 0.7166 highs but the upside quickly faded on ugly Chinese manufacturing PMI, which sank to three-year lows. The Kiwi traded in a tight range near 0.6850, with the underpinned by Fonterra’s payout revision news. The Yen also held onto the gains amid fading optimism over the US-China trade talks and escalating Indo-Pak tensions, keeping the upside in USD/JPY above the 111 handle elusive.
Among the Asia-pac currencies, the Aussie was weighed down by downbeat Australian Q4 Meanwhile, both the Euro and the pound traded modestly flat, as the US dollar was broadly supported by increased safe-haven bids amid mixed Asian markets and negative Treasury yields.
On the commodities bloc, both crude benchmarks traded on the back foot amid moderate risk aversion. Gold prices on Comex remained exposed to downside risks and kept its range near 1320 levels.
Main Topics in Asia
Key Focus Ahead
The German preliminary CPI figures (due at 1300 GMT) are likely to headline the European session ahead, with markets gradually shifting their focus on next week’s European Central Bank (ECB) monetary policy meeting. Ahead of the German inflation report, the Swiss Q4 GDP report at 0645 GMT, German import prices and the UK Nationwide house price index at 0700 GMT are expected to be eyed for some trading impetus. Besides, the CPI readings from across the Euro area economies will also remain in focus.
In the NA session, the main event risk is likely to be the first estimate of the fourth quarter US GDP due at 1330 GMT. At the same time, the US weekly jobless claims, core PCE price index and the Canadian industrial figures will be reported. The US advance Q4 GDP growth is likely to decelerate to 2.3% from 3.4% growth booked in the previous quarter. Later in the American mid-morning, the US regional manufacturing PMI reports will be published ahead of New Zealand building permits and terms of trade index that will drop in at 2145 GMT.
Among the central banks“ speakers, FOMC Vice Chair Clarida is due to speak at 1300 GMT while FOMC member Bostic is scheduled to speak at 1350 GMT.
The yield differential could drop hard toward January lows near 240 basis points if the German data blows past expectations and the core PCE misses estimates, validating the Fed's patience on rate hikes. In that case, EUR/USD will likely find acceptance above 1.1407.
Looking forward, the on-going drama in the UK parliament concerning Brexit could offer immediate impulse to the Cable. Also, the advanced estimates of the Q4 2018 US GDP is another important catalyst to watch.
Gold could fall to $1,300, as the yellow metal established a bearish lower high-lower low with a close below $1,321 yesterday.
American economic growth is predicted to fall to 2.3% in the fourth quarter from 3.4% in the third. If accurate this 3.025% annual expansion would be the first 3% average annualized expansion since 2004.
In the view of the analysts at Citigroup, the US advance GDP figures for the fourth quarter are expected to come in stronger. The US data is due later in the NA session at 1330 GMT.