Key Notes for December 18th
- Swiss Libor Rate slashed to -0.25%
- German Ifo business climate 105.5 vs. 105.6
- UK retail sales m/m 1.6% vs. 0.4%; retail sales y/y 6.4% vs. 4.4%
- US Weekly jobless claims 298k vs. 295k
The morning after the FOMC statement late night saw the Swiss National Bank announce negative interest rates for its sight deposits, cutting rates to -0.25%. Although the news sparked outright selling of the Swiss Franc, the markets soon settled clearly unimpressed by the SNB’s announcement which is being seen as a desperate move coming ahead of the ECB’s QE plans. Although the SNB has reaffirmed its commitment to maintaining the EURCHF peg at 1.20.
The Japanese Yen was little changed trading broadly mixed across the board. USDJPY was seen struggling to break above the 118.97 level, a breach of which could pave way for more gains to the upside. However, a decline towards the daily pivot at 117.95 – 117.614 could see a test of support before rallying higher.
German Ifo Business climate was broadly mixed as the headline reading came out close to expectations at 105.5. The Ifo expectations rose modestly higher to 101.1 vs. 100.5 while the current assessment declined to 110 vs. 110.4. The Euro ignored the news, largely trading based off the SNB’s interest rate announcement. EURUSD declined but is still trading above the major support level at 1.227 levels. Failure to touch down to the support could indicate a fake move, with the potential to rally back towards 1.23695 levels.
UK’s retail sales posted solid growth last month boosted by ‘Black Friday’ sales. Retail sales excluding gas rose 1.7% on a monthly basis above expectations of 0.3% while on a yearly basis; sales increased 6.9% vs. 4.5%. The Cable managed to bounce higher on the news towards 1.562 levels, as noted in our daily technical analysis. However, the larger trend continues to point to the downside with the possibility of a touch down towards 1.5486 levels.
The US trading session opened with the release of the weekly jobless claims which came out better than expected at 289k vs. estimates of 295k. The continuing jobless claims also improved to 2373k vs. forecasts of 2430k. The Greenback managed to find its bullish momentum with the USDJPY rising to as much as 119.145 at the time of writing after initially making an intraday low to 118.261. EURUSD gave back its gains since yesterday and was seen trading new the previous support level of 1.22717. The Cable, which managed to gain on better than expected retail sales data also eased from its highs of 1.566 and was currently trading near 1.56, the lower end of the ranging price action the pair has been since the past couple of weeks.
Despite the USD strength Gold futures managed to hold ground, trading well above the 1200 handle at 1203. More US data is expected to be released in a few hours time which include the flash services PMI calling for a rise to 57.1, CB leading index which is expected to slow down to 0.5% and the Philly Fed manufacturing index expecting to see a soft reading at 26.6
