Markets defying the central banks
OVERNIGHT NEWS
# Dollar off CPI low vs G10 and EM ex-Asia, US bond yields stable after strong buying and solid 30y auction. Fed’s Harker says 25bp hikes “will be appropriate going forward”, Bullard favours moving close to 5% as soon as possible.
# JPY extends gains, 10y JGB yield reaches new high of 0.575%, speculation BoJ will change/ abandon YCC next week.
# Day ahead: Fed speakers Williams, Kashkari, Harker, EU trade balance and industrial production, and Russia CPI.
# UK November GDP +0.1% m/m (-0.3% 3m/3m), above forecast. Manufacturing -0.5%, services +0.2%, trade deficit widens to £15.6bn.
# China trade surplus widens to $78.01bn in December from $69.25bn in November. Exports -9.9% yoy and imports -7.5% yoy.
# BoK raises policy rate by 25bp to 3.50%. MPC split on terminal rate of 3.50% or 3.75%. USD/KRW -0.1% at 1,244.
# Nikkei -1.3%, Euro Stoxx futures +0.1%, EUR 10y IRS flat at 2.71%, Brent crude -0.2% at $83.9/b, Gold flat at $1,897/oz.
Euro curve flattening – new cycle low for 2y/10y Bunds and swaps
COP – USDCOP opened lower at 4688.81 but later consolidated around 4,700 level. COP performs in line with the rest of the Latam region with tailwind from a rally in Brent (1.72%). The COP resistance level of 4,700 still stands, followed by 4,685 and 4,668. Our local trader Santiago Calvache notes inflow interests from most market participants.
