Market sentiment was calmer yesterday following the heightened volatility last week. Global equity markets traded higher across Europe, the US and Asia whilst the dollar weakened against most major currencies and UST yields edged lower.
In President Trump’s proposed spending plan for 2019, the US administration called for a boost in infrastructure spending but markets have shown little reaction to the announcement.
Overnight, South Africa’s ruling ANC’s national executive committee decided to order President Jacob Zuma to resign after a 13-hour NEC meeting, paving the way for Cyril Ramaphosa to take power which is likely to fuel ZAR strength. If Zuma does not resign within the 48-hour window, the ANC will to turn to an emergency vote of no confidence.
In Japan, reports of Governor Kuroda being reappointed for a second term suggest stability for the BoJ, however USDJPY was unchanged as a second term was widely expected by the market.
In UK data yesterday, house prices printed their first annual decline in six years. Despite the negative print, GBPUSD initially traded higher however our traders saw better supply throughout the day. Our traders see GBPUSD support at 1.3765 ahead of 1.3660, with resistance 1.4000 ahead of 1.4070.
Elsewhere, Swedish unemployment data printed slightly stronger than expected (4.0% vs. 4.1%), but the release had little effect on USDSEK. Inflation softened in India after having peaked in December; we continue to think that the Reserve Bank of India (RBI) remains largely data dependent and is unlikely to rush into hiking rates at its upcoming meetings.