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US government reopens, US dollar suffers, May rules out no-deal

Summary:

  • Donald Trump signed a bill to reopen the government for three weeks

  • US dollar suffers from a WSJ article suggesting the Fed considers a quicker end to the run-off

  • Theresa May has reportedly ruled out a no-deal Brexit scenario

  • Chinese industrial profits disappoint another month in a row

Shutdown ends (for a while)

Donald Trump decided to sign a bill to reopen the US government on Friday thus about 800k employees will be offered their paychecks they did not receive for more than a month. However, the bill signed by the US President provides funds for the government only till February 15. Negotiations concerning funds for a wall ($5.7 billion) at the border with Mexico will be held until then. Trump stressed during his appearance on Friday that if there was no deal by then, the government would be shut down once again. On his Twitter account Trump offered his explanation for his surrender writing that “This was in no way a concession. It was taking care of millions of people who were getting badly hurt by the Shutdown with the understanding that in 21 days, if no deal is done, it’s off to the races!” Moreover, according to the WSJ Trump sees “less than 50-50 chance of a border security deal he can accept.” Note that according to an analysis prepared by Standard and Poor’s, the US economy lost at least $6 billion in the five weeks the government was partly shuttered meaning the higher amount that Donald Trump had demanded to build a wall at the southern border. Anyway, it was the shutdown lasting as long as 35 days, the longest one ever. However, Wall Street did not cheer following these revelations but Friday’s finished with decent gains anyway. The NASDAQ (US100) was the best performing index rising 1.3%. Nevertheless these upbeat moods have no translated into rises in Asia. Despite the promising opening, Chinese indices have shed their gains afterwards while the Japanese NIKKEI (JAP225) closed 0.6% lower.

The rise seen on Friday took the US100 closer to the pivotal supply are located nearby 6865 points. Nonetheless, the index lacked sufficient momentum to crash this hurdle. Therefore, one cannot rule out that the price will come back to its 50DMA in the hours to come. Source: xStation5

Dollar suffers ahead of the Fed meeting, May rules out no-deal Brexit

The beginning of Monday’s trading in Europe shows that risk-related currencies are doing the best with the NZ dollar moving up more than 0.3%. The US dollar is losing against its all major peers except the pound. The pound’s slight underperformance has come for all reports brought by The Sun suggesting that UK Prime Minister Theresa May had told her Cabinet that she ruled out a no-deal. In turn, the US dollar weakness started already on Friday’s afternoon when the Wall Street Journal came up with an article signaling the Federal Reserve was considering a quicker end to the run-off. This news came after several Fed members called for a slower pace of rate hikes in the nearest future in order to assess the prior rate hikes’ impact on the economy. It has turned this week Federal Reserve meeting into a much more eagerly watched event as Chairman Jerome Powell may use the first press conference this year to hint at change in plans regarding the balance sheet run-off as well as rate increase in this business cycle. All of the above-mentioned information seem to add up suggesting the Fed could be closer to the end of monetary tightening than anybody would think. These concerns pushed the EURUSD above 1.14 on Friday’s afternoon in Europe and it keeps hovering above this line now.

In the short-term time frame one may see the EURUSD has corrected from its peak to some extent and this move could be extended to the nearest demand zone at around 1.1385. Source: xStation5

In the other news:

  • Chinese industrial profits fell 1.9% YoY in December after falling 1.8% YoY in November, over the entire year the profits rose 10.3% YoY after rising as much as 21% in 2017

  • Japan’s PPI picked up 1.1% YoY in December falling short of a 1.2% increase expected; the minutes from the December BoJ meeting pointed to a continuation of monetary easing

  • Oil prices move down 1.3%, gold falls 0.3% while the US 10Y yield trades at 2.74%

DOE report shows inventory draw, WTI struggles near key resistance
S&P500 has record highs in the crosshairs
DE30 soars despite weak Ifo report
GBP/USD falls to 2-month low
Market alert: Is stock market optimism justified?