Daily Stocks Update: Chinese Government Intervention Spurs Quick Bounce – Jan 12, 2016

Daily Stocks Update: Chinese Government Intervention Spurs Quick Bounce - Jan 12, 2016

Chinese officials eventually decided to intervene in the currency markets to boost the yuan’s value, triggering a bounce for the Australian dollar and New Zealand dollar in overnight trading. AUDUSD bounced off its .6930 lows to retest the .7000 handle, NZDUSD retreated to a high of .6580, AUDJPY pulled up briefly to the 83.00 mark, and NZDJPY found resistance around 77.50.

However, data from Australia and New Zealand have been mostly weak, as ANZ reported a 0.1% drop in job advertisements for the former and 1.8% slide in commodity prices for the latter in December. Later on, Australia is set to print its December employment report and a disappointment could send the Aussie in a downtrend once more.

Crude oil prices continue to drag CAD down

WTI crude oil fell to the $31/barrel levels in the US trading session and is making its way lower in the Asian markets. Brent crude oil also suffered a drop to $30.65/barrel as of this writing and appears poised for more declines. USDCAD popped up to a new high past the 1.4200 handle while CADJPY is down to 82.50.

Fed member Lockhart douses March hike forecasts

The US dollar gave back some of its wins to the commodity currencies but managed to stay afloat against its European rivals. Apart from the Chinese government intervention, another factor that led the Greenback to retreat against the comdolls was the downbeat rhetoric from Fed official Lockhart.

According to Lockhart, policymakers would need more inflation data before deciding whether to hike interest rates again in March or not. In addition, Fed officials would like stronger evidence that the 2% target could be achieved in the medium-term, drawing the attention away from jobs data and onto consumer price levels. So far, the recent declines in commodities aren’t supporting an upbeat outlook.

FOMC member Fischer is set to give his testimony today and another round of cautious remarks could wind up pushing the dollar lower. However, if the Asian stock markets’ behavior is any indication, it looks like risk appetite might weaken again in the upcoming trading sessions, possibly keeping a lid on higher-yielding currencies’ gains.

Other event risks lined up are the UK manufacturing production report and a speech by BOJ Governor Kuroda, although the yen appears intent on taking advantage of the run in risk aversion. US JOLTS job openings and a speech by BOE Governor Carney are also due.