On January 2015, Swiss National Bank (SNB) made headlines by removing the 1.20 floor on EUR/CHF. The Forex market was thrown into a chaos, which saw Swiss Franc strengthened 40% in a couple of minutes.
1 year later, the tremor that kick-started 2016 came from China. The circuit breaker mechanism implemented on their stock market was triggered twice on the first and third trading day of 2016. On the 4th, the first level circuit breaker was triggered after the CSI300 index plunged 5%, trading halted for 15 minutes. When trading resumed, it took only a few minutes to trigger the second level after the market dropped by more than 7% in a single day. Trading was halted for the rest of the day. Two days later, both the levels were triggered in less than 30 minutes after market opened and the market remained closed until end of day.
The tremor was felt across the region, Australia ASX fell 5.3%, Hong Kong Hang Seng dropped 4.1%, Japan Nikkei lost 3.7%, and Singapore STI gave up 3% in the first week of 2016.
Oil refused to let the equity market hog the lime-light. The Bear woke up after the festive season, pushing prices down to hit 32 dollars a barrel to break the 12-year low. With oil prices at record low and possibility of it going even lower, it will pose a great challenge to the major economies to hit their inflation target.
These opened the curtain to Risk-off, with Japanese Yen taking the center-stage. The safe-haven gained against all its counterparts, especially the commodity currencies. It rose 6.7%, 6.3% and 4.8% against the Aussie, Kiwi and Loonie respectively.
This biggest scheduled event this week is the Official Bank Rate announcement and MPC Vote. We expect the Bank of England to maintain their interest rate at 0.5% unchanged. However, given the Risk-off sentiment and record-low oil prices, there is a possibility the only hawkish vote in MPC to sway over to the neutral majority. If this happens, the Sterling could weaken further in the near term.
Top News This Week
UK: Official Bank Rate. Thursday 14th January, 8pm.
We expect figures to come in at 0.5% (previous figure was 0.5%).
US: Core Retail Sales m/m. Friday 15th January, 9.30pm.
We expect figures to come at 0.2% (previous figure was 0.4%).
Fullerton Markets Research Team
Your Committed Trading Partner
