Global equities extended a rally in Asia with Japan stocks gaining despite the JPY strengthening to its strongest level in 15 months, but trading was muted in Asia due to the Lunar New Year closing trading in Hong Kong, China and South Korea. USDJPY traded through 106.00 after Prime Minister Shinzo Abe nominated Haruhiko Kuroda to lead the Bank of Japan for another five-year term.
Elsewhere 10y UST yields stayed above 2.9% and the USD remained under pressure, with EURUSD making new 3 year highs. Our traders see EURUSD resistance at 1.2555 and 1.2800 whilst support remains at 1.2500 and 1.2450.
In UK politics, reports suggested that Britain’s government is ready to push for a mutual recognition system to regulate financial services after it leaves the EU in order to preserve the City of London’s access to the bloc (FT). Focus now turns to UK retail sales data (today) and Prime Minister Theresa May (tomorrow) who speaks in Munich on the theme of ‘Security cooperation post-Brexit’.
GBPUSD continued to gain on a softer USD with the pair trading through 1.4000 yesterday. Our traders see next resistance at 1.4150 and 1.4275, with support at 1.4025 and 1.3980.
In South Africa, local assets continued to outperform with USDZAR falling below 11.60 this morning to new three year lows after Zuma’s resignation. Focus turns to the state-of-the-nation address by the new president Cyril Ramaphosa, scheduled for 9pm GMT today.
In EM, the Indonesian central bank kept policy on hold as expected, keeping its 7d reverse repo rate at 4.25%, in line with consensus. In the Philippines, the BSP cut the RRR by 1%, the first step in a medium term process of adjusting the RRR to the bank’s interest rate corridor framework. Meanwhile, the Central Bank of Egypt cut its policy rate by 100bp.