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AETOS Market Commentary 14/02/2019

AETOS Capital Group

EURUSD

The euro closed lower on Wednesday, closing at 1.1263(-64 pips) against the greenback. The Euro is slightly softer throughout the whole trading session with the 1.12 handle looming back in focus. Weak Eurozone industrial production figures (lowest in 10yrs) and risks attached to potential Spanish snap elections have kept the Euro on the backfoot which reached to as low as 1.1262. Dollar's comeback was a result of a mixture, between encouraging US macroeconomic and political news, and poor EU and UK data. Industrial Production fell in the Union in December by more-than-anticipated, down by 0.9% MoM and by 4.2% YoY, while the UK inflation fell below 2.0% in January taking off pressure on the BOE. As for the US, inflation surprised to the upside, holding at 2.2% YoY in January, despite remaining flat monthly basis. In the political front, market talks indicated that US President Trump is willing to sign the latest Congressional deal to fund the government and avoid another partial shutdown. Germany and the EU will report their preliminary Q4 GDP this Thursday, foreseen up 0.1% and 0.2% respectively quarterly basis. The Union's slowing growth has been one of the reasons for the latest EUR weakness, and worse-than-expected figures could exacerbate its decline. The US, on the other hand, will report December Retail Sales and January PPI, alongside the usual weekly unemployment figures.

GBPUSD

The Pound too fell on Wednesday, closing at 1.2846(-43 pips). On Wednesday, the UK unveiled January inflation data, which came in below the market's outlooks, with the CPI at 1.8% YoY and core inflation stable at 1.9% YoY, in line with the Bank of England's latest forecast and surely taking off weight on policymaker’s shoulders over hiking rates. Producer Prices Output were a bit more encouraging, up 0.4% MoM and 2.4% YoY, while the Retail Price Index fell by more than anticipated, down 0.9% MoM, but up 2.5% YoY. The spike was a result of a report coming from the EU showing that the Union would favor extending the Brexit date, despite no formal request from the UK. Earlier in the day, UK Brexit Secretary Stephen Barclay said that it’s not in anyone's interest to have an extension to Brexit, while Irish PM Varadkar said that there's no such thing as a positive Brexit. Indeed, uncertainty surrounding the UK's departure remains high, resulting in sellers jumping in GBP crosses on spikes. There're no relevant data scheduled in the UK this Thursday. Meanwhile, EU's Tusk said that the EU is still waiting for a concrete, realistic proposal from London.

USDJPY

The Japanese Yen continued to weaken, closing at 110.98(-48 pips) against the greenback. The American currency benefited from the US political-related headlines, indicating that US President Trump will likely avoid another shutdown by approving the latest deal sealed in the Congress and that he could extend the truce with China to extend talks beyond March 1. Equities were up worldwide, while US Treasury yields also gained ground, both bullish factors for the pair. The benchmark yield for the 10-year Treasury note peaked at 2.72% to finally settle around 2.70%. Japanese data released at the beginning of the week once again failed to impress, as the Domestic Corporate Goods Price Index fell 0.6% in January vs. the -0.2% expected, while the YoY reading posted a modest 0.6% advance, below the previous 1.5% and the forecasted 1.1%. Japan will release this Thursday preliminary Q4 GDP seen up 0.4% after falling by 0.6% in the previous quarter.

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Source: https://www.aetoscg.com/uk/market-commentary
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