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What you need to know for the open: Eyes on oil, central banks and US pres. Trump's impeachment trial

  • FX to open steady, weekend absent of market-moving news besides Lybia noise.
  • Oil markets could be underpinned by Libya noise as tensions rise and Eastern Libya ports closure. 
  • The focus will be US President Donald Trump's impeachment trial in the Senate.
  • Central banks met this week, although no fanfare expected. 
  • European data and NZ CPI in focus. 

Besides the Lybia noise, there have not been any major escalations on the geopolitical front over the weekend, so we should expect the quiet before the storm at the open on a heavy central bank and key economic data week ahead. A key focus will be on US President Donald Trump's impeachment trial in the Senate which will start following Martin L. King's Birthday on 20th Jan. 

Key topics

War averted between US and Iran, focus shifts to Libya: At the start of the year, the US and Iran were on the verge of out-right conflict following the assassination of top Iranian General Qassem Suleimani (for plotting attacks on US embassies in the region) and subsequent realisation on a US base in Iraq, where no US persons were harmed. However, US President Donald Trump responded to the attacks with an address which de-escalated tensions and the threat of outright imminent war. Markets got back to business as usual and instead focussed on the Sino/US trade deal signing ceremony. There were expectations of a sell the fact outcome, but instead, US equities printed fresh all-time highs and USD/JPY ground higher, making a score of 110.29 at last week's close. 

Meanwhile, as markers looked set to now focus strictly on this week's central banks meetings and key economic data, geopolitical tensions have come back to the fore. There is an eight-year conflict in Libya which has lately garnered the attention of markets for the first time since the assassination of Muammar Mohammed Abu Minyar Gaddafi. It could have an upside impact on the price of oil at the open and throughout the weeks ahead considering the Eastern Libya ports, currently under the control of commander Khalif Haftar, are stopping oil exports from the region. More on that here: The conflict in Libya will be a focus for oil traders this week

US President Donald Trump's impeachment trial in the Senate: Members of the upper house will decide when they return from Martin L. King's Birthday on 20th Jan whether to remove Mr Trump from office. As the Republican party hold a Senate majority, he will likely be acquitted. But House impeachment managers - in essence, the prosecutors - will try to convince senators that the president should be ousted from the White House, for abuse of power and obstruction of Congress.

US dollar a touch firmer on Friday: The DXY ended +0.34% higher on Friday, extending towards the 200-DMA and confluence of the late Sep 2019 resistance line for a third test at 97.66.  

USD/JPY is a key performer: USD/JPY, after comfortably breaking through the 200-DMA at the start of the month, has been flirting with a topside breakout above 110.20, scoring a high last week of 110.29, but failing to convince, leaving a bearish spinning top on the daily charts despite the prior day's engulfing candlestick. See more here: Chart of the week: USD/JPY, spinning top and channel resistance favours downside correction

Positive noises on trade: Following the signing of the US/Sino trade agreement which lifted market spirits, focus turns to the US and European trade relations. Last week, European Union trade commissioner Phil Hogan said his meeting with senior US officials marked a "good start" to resetting trade ties with Washington, but there was more work to do. Hogan told reporters he had a good exchange of views with US Trade Representative Robert Lighthizer several times during his visit.

Looking ahead for the week, key scheduled G10 events

ECB, BoJ, and BoC meet. We also have crucial European and UK PMIs:

  • 21 Jan: BOJ Decision.
  • 21-24 Jan: World Economic Forum in Davos.
  • 22 Jan: Bank of Canada Rate Decision, Canada CPI Inflation (Dec), Bank of Canada Rate Decision.
  • 23 Jan: ECB Decision, Australia Employment (Dec).
  • 24 Jan: New Zealand CPI (Q4), UK and EU January Flash PMIs, Manufacturing PMI, Services PMI.

Chart of the week

  • Chart of the week: USD/JPY, spinning top and channel resistance favours downside correction

 

 

 

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