From Marc Chandler at Bannockburn Global Forex:
Overview:
The US dollar's sharp upside momentum stalled yesterday near JPY115 and after the euro met (and surpassed) a key retracement level slightly below $1.1300. Led by the Antipodean currencies today, the greenback is mostly trading with a heavier bias. Among the majors, helped by a steadying of US yields, the yen is soft. In the emerging market space, the Turkish lira continues its headlong plunge while the yuan softened and the Mexican peso is off. Hungary's central bank surprised with a 70 bp hike in the one-week deposit rate. The JP Morgan Emerging Market Currency Index is posting a small gain through the European morning. Disappointing tech results in China (Baidu and Bilibili) weighed on Chinese shares, but most markets in the region fell but Australia and Taiwan. Europe's Stoxx 600 is struggling to extend the six-day advance. US futures are also a little firmer. After yesterday's four basis point pullback, the US 10-year yield is little changed near 1.58%. European yields are 1-2 bp lower. Gold remains within Tuesday's range (~$1850-$1877), but the moment seen earlier last week has faded, and the yellow metal is trading choppily in a consolidative phase. The prospect of a coordinated sale of oil after China's announced it would tap its reserves for the second time saw the January WTI contract fall to $76.45, its lowest level since early October. Still, the price has stabilized in the European morning around $77 a barrel. The benchmark European natural gas contract (Netherlands) has extended yesterday's pullback. It settled a little below 75 euros last week, and after two days of declines, it is above 92 euros. Iron ore is also falling for a second session and is now lower on the week. Note that it settled October a little above $104 and is now around $86.40. Copper is lower for the fourth consecutive session. It is trading around $424, off $20.5 this week.
Asia Pacific
Japan is expected to unveil the much-awaited supplemental budget tomorrow. Prime Minister Kishida will get one bite of the proverbial apple, and he is expected to go big. Talk of the size of the overall package has risen in recent days. The Nikkei seemed to suggest a JPY79 trillion (~$690 bln) effort, while others report something on the magnitude of JPY56 trillion. Still, it is recognized that part of the budget will include funds that were earmarked under previous budgets, which have not been spent. The clear water is seen around JPY32 trillion. Japan is one of the few countries that will provide new fiscal support.
New Zealand's central bank meets next week. It is widely expected to hike rates for the second time in the cycle. The swaps market has 200 bp of tightening priced in for the next 12 months. The cash rate stands at 50 bp. Earlier today, the central bank reported that the two-year inflation expectations (business survey) rose to 2.96% in Q4 from 2.27% in Q3. It is the highest in a decade. The one-year expectation rose to 3.7% from 3.02%. Still, with other countries slower to raise rates, a 50 bp move may not be necessary. The Kiwi rose almost 4% last month and has given back nearly half so far in November. Separately, the Philippines and Indonesia central banks met and left rates steady as expected.The dollar posted a key reversal against the yen yesterday....
....MUCH MORE
