Risk appetite remains strong in global financial markets. All three major US indices, DOW, S&P 500 and NASDAQ made record highs over night. Optimism carries on in Asian session. Even though Nikkei is trading a touch lower, stocks in China and Hong Kong are strong. The biggest surprise overnight was the surge in US treasury yields. 10 year yield close up 0.066 at 2.546. 2.621 key medium term resistance is now within reach. The development also helped lifting the dollar index back above 92.5. The greenback is probably finally preparing for a sustainable rebound.
10 year yield surged sharply to close at 2.546. The development continues to affirm the case that correction from 2.621 has completed at 2.034. Rise from there is in progress for retesting 2.621 resistance. Decisive break there will resume the up trend from 2016 low at 1.336. Such development should give a strong boost to Dollar. This will remain the favored case as long as 2.405 holds.
As we mentioned, before, Dollar index was close to 100% projection of 95.15 to 92.49 from 94.21 at 91.55. And it touched lower channel support already. If the fall from 95.15 is a correction, the index should be close to bottoming and reversal. Break of 55 day EMA (now at 93.21) would affirm this and turn focus to 94.21 resistance for confirmation. However, another decline through 91.55 will resume the larger down trend instead.
UK Ministers urged close cooperation between regulators after Brexit
In UK, Chancellor of Exchequer Philip Hammond and Brexit Secretary David Davis published a joint article for German newspaper Frankfurter Allgemeine Zeitung. They urged close cooperation between EU and UK finance regulators after Brexit. And with that, "such a catastrophe" like 2008 global financial crisis "doesn't happen again". And they urged to "re-double our collective effort to ensure that we do not put that hard-earned financial stability at risk, by getting a deal that supports collaboration within the European banking sector, rather than forcing it to fragment."
Moody's optimistic on APAC sovereign outlook and growth
Rating agency Moody's said that APAC sovereign outlook for 2018 is stable. It noted that the region's economic strength and high levels of trade openness well positions the nations to benefit from stronger global growth. APAC emerging markets are projected to grow by 6.5% in 2018. Frontier economies are projected to grow by 5.9% while advanced economies by 1.8%. India and China will remain the fastest growing countries in the region. While there would be gradual moderation in China and temporary slowdown in India, the impact will be offset by robust growth in other countries.
On the data front
China CPI quickened to 1.8% yoy in December but missed expectation of 1.9% yoy. PPI slowed to 4.9% yoy, above expectation of 4.8% yoy. UK productions and trade balance are the main feature in European session. Canada will release building permits, UK will release import prices later in the day.