Risk return temporary

January 13, 2016

Finally some risk appetite is returning to Asian markets which have bounced overnight and this is due to feed into today’s European session. Chinese trade data was better than expected with a surprise improvement in exports which has been assisted by a weaker yuan. The China story has dominated the markets so far this year and in one way it’s nice not to be talking about other things such as the Fed, but in others this topic is likely to remain a dominant force in 2016, more so than in the past as the world’s second largest economy continues to slow meaning this return of risk appetite we’ve seen so far this week may be temporary.

Economic data to focus on today comes in the form of Eurozone industrial production which is expected to decline. If we see a deterioration along the lines of yesterday’s industrial and manufacturing data from the UK then we could see a corresponding move to the downside in the single currency. EURUSD has pulled back from its attempts of breaking the 1.1000 level once again and looks vulnerable to further weakness, especially since today sees some Fed members speaking in the form of Rosengren and Evans, so it will be interesting to hear their thoughts on last week’s impressive nonfarm payroll. Then there’s the release of the Beige Book, so we could see some volatility in the dollar.

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