EUR/USD, GBP/USD
In the first half of Wednesday, the euro and the pound moved in a sideways trend ahead of the release of US industrial production data. The final estimates of the euro area CPI for December came with a slight change: the basic CPI remained at 0.9% y/y, the total CPI fell from 1.5% y/y to the forecasted 1.4% y/y. Statements by ECB members Nowotny and Vitor Constancio (on the same day) about worries on the high euro exchange rate and the undesirability for the European economy of its current value did not impress investors.
The volume of industrial production in the US in December grew by 0.9% against expectations of 0.4% with an increase in capacity utilization up to 77.9%, while expectations was at 77.3%. Investors once again felt an appetite for risk, and the euro and the British pound went up along with the stock indices. Later, it was announced that the Bank of Canada increased the rate from 1.00% to 1.25%. The Canadian dollar began to strengthen and pulled other counter dollar currencies with it. However, the comments of the head of the Central Bank of Canada Stephen Poloz failed to provide the necessary additional impulse. He said that the rate can be adjusted depending on the results of the NAFTA negotiations. As a result, the Canadian showed a sharp growth, 39 points added to the pound, and the euro fell 72 points after a jump in growth in yields on US government bonds - 5-year bonds rose in profitability from 2.348% to 2.409%.
Today at 06:00 London time, important data on China will be released. GDP for the 4th quarter is expected to grow by 6.7% against 6.8% in the previous period. Industrial production for November is assumed to be unchanged, 6.1% y/y, retail sales may fall from 10.2% y/y to 10.1% y/y. The volume of investments in fixed assets in November may also slow down from 7.2% y/y to 7.1% y/y.
According to the US, macroeconomic data is also expected to show some easing, but now on the cutting edge is the question of raising the limit of public debt. The current financing of the budget ends on January 20. However, the Treasury has reserves for emergency financing. The stumbling block is that Trump is pushing for the US-Mexico border wall. The situation is that Trump previously promised to shift the cost of its construction on Mexico, but in fact it is paid by the Americans. The number of housing starts in the US for December is projected at 1.28 million versus 1.30 million in November, issued permits for the construction of a new house is expected to be 1.29 million from 1.30 earlier, the index of business activity in the manufacturing sector of Philadelphia in January may fall from 26.2 to 24.9.
In the current situation of uncertainty, markets can remain in a state of free wandering until the end of the week and until next Monday. For the euro, this could be the range of 1.2090-1.2210, the range of the British pound is 1.3740-1.3840.
USD/JPY
On Wednesday, the yen was able to escape from a critical seven-day three-hundred-point drop, helped by the dollar itself, which stopped falling with the weakening of fundamental factors. The yen added just over 80 points. The yen also had its own positive support - the volume of domestic new orders for manufacturing products in Japan, excluding orders for vessels and communal equipment (Core Machinery Orders) in November increased by 5.7% while waiting for -1.3%.
Today, data on industrial production for November was released. The growth was 0.5% against expectations of 0.6% and a 0.6% gain in October. The first reaction to the news was a decline in the yen.
The stock indexes of the APR are growing, providing traditional support to the yen. Japanese Nikkei225 + 0.64%, China A50 + 0.36%, Indonesian IDX Composite + 0.34%, Indian Nifty50 + 0.79%.
In general, the Japanese currency has also developed a neutral situation. Obviously, the main driver of the yen is currently the dollar. Until the end of the week, we expect lateral trading in the range of 111.00/70.