Market Review – Fundamental Perspective 11 January 2018

US equity markets fell slightly yesterday and the S&P dropped by around 0.1% thereby breaking its winning streak since the beginning of 2018. The US 10y yield reached a nine-month high after reports that China may slowdown its purchases of US Treasuries which weighed on USD.
Overnight, Chinese sources claimed that the reports from the previous day were inaccurate which triggered a retracement of bond yields and USD.
GBP underperformed yesterday despite industrial production for November printing higher than expected at 2.5% y/y (Consensus: 1.8% y/y). The news headlines on Merkel coming out in opposition to a bespoke trade agreement post-Brexit was the main source of GBP weakness.
GBPUSD support comes in at 1.3475 ahead of 1.3300 with resistance at 1.3620-60. EURGBP support comes in at 0.8800 with resistance at 0.8925.
CAD and MXN sold off overnight against USD after Reuters reported that Canadian officials see the probability of the US pulling out of NAFTA as more likely. Market sensitivity to NAFTA headlines has increased ahead of the upcoming negotiation round on January 23-28.
The Bank of Israel and the Bank of Poland left rates unchanged as expected. The NBP struck a dovish tone in the press conference, highlighting disinflation risk in 2018.
The minutes from the latest ECB meeting will be released today at 12.30 and investors will be looking out for any further clues around the growing dissenting views within the committee.

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