FX Caught in Central Bank Rhetoric

Trump signaled optimism on a China trade deal Thursday but the ECB's Weidmann warned on growth. The ECB wasted little time in sending out dovish comments after the dovish twist FOMC statement. Expect more of this in 2019 as central banks grow immobile on the interest rate front. Watch out for flows ahead of China's week of holidays on Friday. The Silver long Premium trade at 14.80 from mid October reached the final target of 16.10. All existing FX and index Premium trades are currently in the green. EURUSD regains 1.1460s on higher than expected estimated core CPI. The US jobs and ISM manufacturing reports follow next with questions on the extent of the shutdown on the figures.

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The S&P 500 closed out its best month since October 2015 with another strong day after Trump hinted at progress on a deal with China. He sent a letter to Xi saying he hopes both sides can meet halfway as the pair planned a meeting for late February. USD/JPY also got a slight lift from the progress but was bogged down by continued post-Fed softness and month-end sales.

Earlier yestyerday, euro skidded to 1.1440s from 1.1480 after a dovish message from a surprising place. Bundesbank leader Weidmann warned on soft growth this year and said inflation forecasts are likely to miss to the downside. EURUSD is back above 1.1470 as traders placed more emphasis on the 1.1% core CPI than the 1.4% headline.

Gold and oil both hit new highs for the month late in the day then reversed to finish lower. January has proven to be positive month for gold, rising in 10 out of the last 13 years. That could be a sign of worry or simply reflect strong months for both.

One worry on Friday will be repositioning for the new month and bracing for the week-long holiday in China for lunar new year. The event sparks a widespread need for liquidity and gold tends to suffer early in the week before rebounding. Leveraged trading is also ramped down and that can cause swings especially in industrial metals.