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Event risk in the forefront

Attention is being tied transatlantic at the moment with Brexit rhetoric and President-elect Donald Trump’s imminent inauguration occupying the minds of the market.


Asian markets were weighed at the start of the week after a good run last week and looks set for a day of mixed performance ahead of UK Prime Minister Theresa May’s Brexit speech. GBP/USD continued to trade on either side of 1.2050 after plunging to the lowest level since 1986 while EUR/GBP was seen trading above $0.8800 into Asia morning.

This had helped to support the USD index above 101.50 with thin market trading on Monday on the back of the Martin Luther King day break. Despite the pound-dollar having declined to levels below the flash crash in October, the market appear to be bracing for further deterioration of conditions.

Tough rhetoric from PM Theresa May, citing that the UK will not be “half-in-, half-out” of the EU paints a worrying picture for trade relations and the hub-status of the UK in the Eurozone. The 12 key objectives for Brexit negotiations to be shared by the PM will likely be the highlight for the day. For Asia, GBP/USD shorts and a creeping USD index could keep pressure on the upside for USD/Asians.

Separately, as the market continue to adjust to the risk of over-exuberance ahead of President-elect Donald Trump’s entry into office, China’s President Xi Jinping will be addressing the world at Davos’ World Economic Forum (WEF). Countering the recent concern of waning global relations, President Xi’s address and discussion on free trade could potentially be a shot of stability amid the current uncertain climate.

Safe havens continue to eat into recent equity market gains. USD/JPY slipped once again to sub-$114.00 levels while gold prices maintained its position above $1200. Expect the jitters to stay for the week with President-elect Donald Trump’s inauguration looming ahead.

Meanwhile, Singapore’s December non-oil domestic exports came in at 9.4% year-on-year (YoY), beating the market consensus of 5.8% YoY. Electronics exports was seen improving from the previous month, up at 5.7% YoY. This is the second month in which the NODX had printed a significant surprise on the upside and USD/SGD reacted with a dip post-announcement.

The final figures for Japan’s November industrial production will be due in the day ahead of key data from the UK. Eyes on Brexit news.

Yesterday: S&P 500 +0.18% (Friday); DJIA -0.03% (Friday); DAX -0.64%; FTSE -0.15%

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