20140115

Good morning,

Equity markets were on the bid and the US Dollar increased yesterday on back of strong US December Retail Sales, which lifted sentiment after the horrible NFP figures on Friday. S&P and Nasdaq managed to gain more than one percent, while the Dow managed a 0.7% gain. The USD gained more or less across the board and after two days of dojis in EUR/USD, the pair has managed to break below the 50-day SMA this morning. A very strong November European Industrial Production made equities smile with EURO Stoxx 50 taking home 0.2%, but the EUR was not able to benefit considerably. UK also hit the wires with a string of inflation figures, where the majority came out a tad lower than expectations. For the first time since 2009, the Consumer Prices came out in line with the 2.0% inflation target, set by the BoE. Cable was bid yday, but a break below the 50-day SMA at 1.6349 could trigger a move to 1.62.

Overnight, risk sentiment followed in line with the optimism from the US and EU sessions despite the fact that the solid US Retail Sales allows for the Fed to be more aggressive on the tapering. However, the paradox is to run a decent monetary policy with a slowdown in job growth and a boom in retail sales. Yesterday's figures have led to a positive bias for growth, but the expectation for the US GDP is still a little above 3%. On the macro side, Chinese New Loans for December disappointed and these will be interesting in light of next week's key data for the Chinese economy and could put a damper on growth, which could be reflected throughout the Asian region. Nevertheless, Nikkei took home 2.5%, while the ASX and Hang Seng took home 0.6% and 0.5%, respectively.

Today there are no significant releases from Europe, but we expect focus to be on the US Empire State Manuf Index for January, expected at 3.75 vs. 0.08 prior, as well as the PPI for December. The Headline is expected to increase 0.4% MoM, while the Core is expected at 0.1%. The Empire index will receive the most attention as it is a leading index, but as we have figures both on the growth and inflation side, then we should see some decent market activity following the releases.

Have a nice day.