Despite another positive performance on Wall Street yesterday, the mood across Asian markets was less enthusiastic today.
Huawei under investigation
One of the clouds hanging over markets was news that US Federal authorities were launching an investigation into China’s Huawei Technologies for allegedly stealing trade secrets from US companies. As the investigation deepens and broadens, it could impact the mood in the upcoming trade negotiations between the US and China which, since the first meeting of the year earlier this month, appeared to be on a more positive footing.
It was a sea of red across Asian bourses, with losses ranging from 0.3% for Austrian shares and UK futures to 1.0% for the China50 index. Currency markets also reflected the risk-off mood, with AUD/USD slipping 0.1% and USD/JPY dropping 0.2% to 108.88, after failing to overcome the 50% retracement level of the December 13 to January 3 drop.
USD/JPY Daily Chart
Brexit delay rumours abound
As soon as PM May’s government survived the vote of no confidence last night, the press, and markets resumed their analysis of “what next”.
German press suggested that Europe may be willing to give some more concessions on the Irish backstop, but commanded that any initiative had to come from the Irish themselves. Meanwhile, the UK Times said EU officials were reportedly considering plans to delay Brexit to 2020 after Germany and France had indicated a willingness to open talks.
This aspect lent support to the pound today, with GBP/USD posting gains of 0.05% to 1.2884 to once again knock on the door of the 100-day moving average at 1.2892. The moving average has capped prices on a closing basis since November 8. Gains against the Euro were more elusive, with EUR/GBP edging 0.01% higher to 0.8846.
GBP/USD Daily Chart
Beige Book gives mixed reports
Despite 8 out of the 12 Federal Reserve districts reporting modest to moderate growth in the latest Beige Book report, the future outlook expressed by many businesses had become less-optimistic in recent months as “increased financial market volatility, rising short-term interest rates, lower energy prices and elevated trade and political uncertainty” started to have an impact.
The timing of the report came two weeks after the US government shutdown began and, since it is now in its fourth week and with no evidence of a solution coming soon, you could expect the next report to reflect even deeper concerns about the state of the US economy.
Euro-zone CPI not an issue
The main event on today’s data calendar will likely be the release of Euro-zone CPI for December. Prices are seen rising 1.6% y/y, the same pace as November, and below the ECB’s target rate of 2%. December would be the third month in a row it has held below 2%.
The South African Reserve Bank is expected to hold rates steady at today’s meeting while the US Philadelphia Fed survey is forecast to show a mild rebound to 10.0 in January from 9.1 last month. Fed’s Quarles (neutral, voter) is scheduled to speak.
The full MarketPulse data calendar can be viewed at https://www.itcmarkets.com/hawk-dove-cheat-sheet/ 
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