The Asian session today started off quiet, with traders from Japan returning from a lengthy holiday break, only to be faced with softer CPI numbers from Japan. The OZ markets remained shut today in observance of Christmas Day. Profiting from the resurgent greenback demand along with not too good Japanese data is the USD/JPY pair, while the Australian dollar was dragged lower by the dwindling copper prices. The New Zealand dollar emerged the least performing currency in Asia along with lower oil prices, stronger DXY and higher treasury yields.
The European apex bank i.e. the ECB has told Italy’s stressed Monte dei Paschi that it has to come up with €8.8 billion ($9.2 billion), an amount considerably higher than the original €5 billion that the Italian bank was expecting. Monte dei Paschi was on Friday unable to achieve the backing it needed from investor, and consequently, the Italian government approved a bailout of the 3rd largest lender in the country.
The European Central Bank has said that Monte dei Paschi is not bankrupt, rather the bank’s liquidity position had decreased considerably between the end of November and the 3rd week of December, which resulted in the update in terms that was imposed upon Monte dei Paschi. Italy’s market watchdog, CONSOB (which is also responsible for the regulation of Forex brokers), announced that Monte dei Paschi’s bank securities and shares would be barred from trading until the bailout terms are set.
The European single currency traded 0.2% lower on Tuesday, testing the $1.0435 level. The greenback also appreciated versus the Japanese Yen on Tuesday, trading at 117.39. The Japanese Yen fell following data that was out on Tuesday which showed that the country’s core consumer prices dipped for the 9th consecutive month in the month of November, in addition to a decrease in household spending notwithstanding the fact that job availability tested a fresh 25-year high.
The 10-year Treasury yields in the United States kept pace with its gains, surging almost 1% on Tuesday to get back its losses on Monday. This rise boosted the greenback against its primary trading allies. The dollar index was higher 0.1% to 103.13, only somewhat below the December 2002 peak it tested last week.
The market has been seeing oil stay steady above the $55 a barrel mark on Tuesday, creating support as a result of hopes of tighter supply once the 1st output freeze agreement between OPEC and non-OPEC members in 15 years takes center stage on Sunday.
The official start date for the deal by the Organization of Petroleum Exporting Countries and other non-OPEC members to freeze production by about 1.8 million barrels per day (bpd) is January 1st. Brent crude stayed unchanged at $55.16 a barrel at about 11:30 GMT. The global benchmark tested the $57.89 level on December 12th, the highest level it has reached since July 2015. U.S. crude did appreciate by ¢15 to reach $53.17.
Trading was absent on Monday following the Christmas holiday, and volume was expected to be thin on Tuesday. We may see crude oil struggle to rally going forward before proof is laid of OPEC’s compliance to the freeze, according to analysts.