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European Fixed Income Outlook:Stock markets moved higher in Asia overnight after shrugging off early losses, U.S. futures are also moving higher, but European markets are likely to continue to struggle with the weak USD. The EUR in particular has been pushed higher as markets run away with rate hike fears after last week’s ECB minutes, ignoring the hint that any change in the forward guidance will focus on net asset purchases, rather than the sequencing of exit steps, i.e. interest rates, which are still not expected to end until well after net asset purchases have been halted. Yields moved higher in Europe yesterday and stock markets struggled. Today’s focus will be on final inflation readings out of the Eurozone, but primarily key U.K. inflation data and a dip in the headline CPI rate is expected to 3.0% from 3.1% y/y in the previous month.

FX Update: USDJPY has lifted to the upper 110.0s after opening in Tokyo just under 110.50. There were some remarks of disquiet about yen strength from both finance minister, Aso, and the economy minister, Motegi, which followed a six consecutive session run lower in USDJPY that yesterday left a four-month low at 110.33. Japanese December PPI also came in a smidgeon shy of expectations, at 3.1% y/y, while another USDJPY supporting influence is a large USDJPY option structure with a 111.20 strike which is due to expire at the New York cut today. USDJPY posted an intra-day peak at 110.98. Resistance at 111.05-7, and support is at 110.29-30.

Charts of the Day


Main Macro Events Today        


  • UK PPI- December PPI is penciled in at a 0.5% y/y, slower than the 1.8% previously.
  • UK CPI- A moderation is expected to 3.0% y/y after November’s 3.1% y/y clip, an outcome which would square with BoE projections.
  • US Empire State Manufacturing Index – The January Empire State manufacturing index should rise 1 point to 19 after falling 1.4 points to 18.0 in December
  • SNB Chairman Jordan Speech

Support and Resistance Levels


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Andria Pichidi

Market Analyst

HotForex

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