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China GDP beats, PBOC cuts rates

“The only place where success comes before work is in the dictionary.” – Vidal Sassoon

 

 

 

HEADLINES

 

 

 

  • Dollar edges up as traders assess Fed rate hike bets
  • China tops forecasts with 8.1% growth in 2021 but headwinds loom
  • Oil climbs as supplies expected to remain tight
  • Gold holds ground despite Fed's rate rise signals
  • European shares edge higher ahead of earnings; China adds stimulus
  • USD/JPY: Downside bias as global growth and inflation recede – Danske Bank

 

 

 

FOREX

 

 

 

Dollar edges up as traders assess Fed rate hike bets

 

The dollar edged higher on Monday as traders continued to hold on to dollars but took the view that Federal Reserve tightening plans were largely priced in, while the euro eased from Friday’s two-month high. An unexpected cut to key lending rates in China highlighted it as the outlier, with other major central banks in talks to raise rates. China's move only briefly weighed on the yuan.

 

China tops forecasts with 8.1% growth in 2021 but headwinds loom

 

China's economy rebounded in 2021 with its best growth in a decade, helped by robust exports, but there are signs that momentum is slowing on weakening consumption and a property downturn, pointing to the need for more policy support.

Growth in the fourth quarter hit a one-and-a-half-year low, government data showed on Monday shortly after the central bank moved to prop up the economy with a cut to a key lending rate for the first time since early 2020.

 

 

 

COMMODITIES

 

 

 

Oil climbs as supplies expected to remain tight

 

Oil prices rose on Monday with investors betting that global supply will remain tight, although restraint by major producers was partially offset by a rise in Libyan output. Brent crude settled up 42 cents, or 0.5%, to $86.48 a barrel. Earlier in the session, the contract touched its highest price since Oct. 3, 2018, at $86.71. Trade was subdued due to the U.S. holiday honoring slain civil rights leader Martin Luther King Jr.

 

Gold holds ground despite Fed's rate rise signals

 

Gold prices held their ground on Monday, with gains capped by expectations of monetary policy tightening in the United States. While considered an inflationary hedge, gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion. U.S. 10-year Treasury yields hit two-year highs last week on expectations for higher interest rates.

 

 

 

STOCKS

 

 

 

European shares edge higher ahead of earnings; China adds stimulus

 

European shares recovered from Friday's losses on Monday as investors focused on company earnings and U.S. Federal Reserve policymakers entered a quiet period ahead of their meeting next week. Stock market moves in Asian trading were small and economic data from China was mixed: industrial output picking up but retail sales missed expectations.

China's central bank unexpectedly eased policy by cutting rates on medium-term loans. Analysts expect more policy easing as growth in the world's second-largest economy has shown signs of slowing from its rapid rebound after the COVID-19 slump.

 

 

 

ANALYSIS

 

 

 

USD/JPY: Downside bias as global growth and inflation recede – Danske Bank

 

“A rebound in US yields and commodities, in particular oil has weighed heavy on JPY over the recent month, which drove USD/JPY above 116. On broad USD weakness on the back of the December US CPI figures, the cross corrected significantly lower again, though. We see an increasing risk that central banks are forced to tighten significantly to bring demand down while fiscal stimulus wanes, which will move the global economy in to a period with slower growth and less inflation. That will result in flatter yield curves and less pressure on commodity prices including oil. We forecast the cross at 113.5 in 1M, 112 in 3M and 111 in 6M and 109 in 12M.

 

 

 

CHART

 

 

 

Silver – Daily Candlesticks

Source: GKFX Prime Metatrader 4

XAG/USD is stuck in a sideways range. The price is currently testing the midpoint of the range whereby a breakout could open another test of the top of the range. - Prepared by Trading Writers*

 

 

 

CALENDAR

 

 

 

*Times in GMT

 

 

Source: FX Street Economic Calendar


 

 

SOURCE

 

 

 

https://www.fxstreet.com/economic-calendar
https://www.fxstreet.com/news/usd-jpy-downside-bias-as-global-growth-and-inflation-recede-danske-bank-202201171638
https://www.investing.com/news/commodities-news/oil-extends-rally-on-supply-tightness-brent-at-more-than-3year-high-2740132
https://www.investing.com/news/economy/asia-braces-for-china-data-oil-nears-2021-highs-2740121
https://www.reuters.com/markets/asia/chinas-q4-2021-gdp-grow-faster-than-expected-2022-01-17/

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