China, Yellen and BoJ will give the Tone – 19 Dec 2016

China, Yellen and BoJ will give the Tone – 19 Dec 2016


With Christmas not far away we expect a quiet day with minor trading opportunities and low volatility. Today we will focus on Yellen speech on the state of the job market at Baltimore University and we would like to see if we get any signals from her about future monetary policy. Today we should also focus on the impact and details of the last Friday’s issue between Chinese and USA navy drone, as it’s the last thing that investors want to see at the moment is a rise in tensions between the two largely military forces in the world.

We will focus also on BOJ meeting later tonight. The Japanese trade data for November that released this morning was above expectations. We do not think that BOJ will get extra stimulus as the last month’s plunge of Yen however do not forget that BOJ likes to surprise markets.

On one hand we see USD at the current prices as overbought and we see high probabilities for some correction soon. On the other hand we see some high probabilities for a bullish reversal for GBP as there are speculations that Britain can achieve to stay in the European customs union after Brexit and achieve a similar trade deal that Turkey has with Europe.

Daily Key points:

• Beijing issues highest possible air pollution alert – cuts & shuts 1200 factories
• Fed’s Lacker: Lots of uncertainty about future Trump economic policy
• UK’s May tells EU leaders she wants an early Brexit deal
• UK sells negative-yielding debt for first time
• Crude Oil Erases post Fed drop as OPEC Returns to Focus

The Trump’s effect in numbers:

• EUR/USD finished Friday at the lowest weekly closing level since 3 January 2003, 728 weeks earlier
• USD/JPY has rallied for 6 weeks in a row, adding Y14.70 (+14.3%), making this the biggest 6 week gain for at least 45 years
• The Dow has rallied for 6 weeks in a row, adding 10.9%, making this the biggest 6 week gain since 11 Nov 2011, 266 weeks earlier
• Gold has fallen for 6 weeks in a row, dropping 13%, making it biggest 6 week fall for 187 weeks. Run has extended once since June 1999
• The Nikkei has broken the previous week’s high for 11 weeks in a row. The run has not extended to 12 weeks for at least 26 years

Daily Economic calendar:
Country Event Importance Previous Expectations Follow Times
Germany German Ifo Business Climate Medium 110.4 110.7 euro 12:00
Germany German Buba Monthly Repor Medium n/a n/a Mediun/am 14:00
Japan BOJ Policy Rate High -0.1 -0.1 All indices Tentative
Japan Monetary Policy Statement n/a n/a n/a All indices Tentative