Jumat, 01 Maret 2013

Friday News

Data/ Event Risks EUR: The market expects Eurozone inflation to fall below 2% when the ‘flash’ estimate is released at 10:00 GMT. This would be the first time for over two years that headline inflation will have been below target. Weaker number would nudge euro lower, but focus remains on Italy and the possibility of a government being formed. USD: The ISM will be of most interest at (15:00), although a stronger number may not be that dollar positive, at least judging by the recent reaction, with the dollar soon sold after last month’s stronger than expected outcome. GBP: Beware with sterling data, as against the current backdrop stronger activity data could be taken as a reason to find better levels to short the currency. That said, a more aggressive short-squeeze higher on cable can’t be ruled out given the extent of the sell-off over recent weeks and volatility risks are higher on a Friday. Idea of the Day Eighteen months ago the US agreed a package of severe spending cuts as a means of forcing politicians on both sides to come together and agree on something far more sensible. The plan didn’t quite work out as planned, so today these spending cuts come into force in the US. Financial markets have been through several of these budget battles in the US in recent years and there’s an underlying expectation that a deal will be stitched together and then be back-dated. This may happen, but the fact that the US is proving to be so bad at dealing with its budget challenges in a more grown-up way does spell danger for the future. For now, we could see the dollar hold its better tone as the risk aversion bid trumps the fiscal mess offer. Latest FX News EUR: Still feeling a little vulnerable on the first trading day of the month, with the 1.30 level a little too close for comfort. Eyes are on ECB 3Y loan repayment window today at 11:00 GMT. JPY: The latest inflation data showed prices still falling. On the headline measure, prices were down by 0.3% YoY and on the measure excluding fresh food by 0.2%. Naturally, this leaves the 2% inflation goal a long way off and expectations are strong that new BoJ governor Kuroda will put in new measures in April. GBP: Latest data on house prices (from Nationwide) showed annual rate at zero. Overall, sterling is still struggling to find direction and vulnerable to some choppy activity on first trading day of the month. AUD: Aussie holding its ground during the Asia session. Continued hold above 1.0150 on AUDUSD should allow longs to build once again in the established range. CNY:Gaining some ground after recent declines after softer than expected purchasing managers reports overnight. The manufacturing series fell to a 5 month low at 50.1. CNH continues to strengthen, down to a 2 week low at 6.2175.

Kamis, 28 Februari 2013

FOREX UPDATE

DATA / EVENT RISK : EUR: The German labour market data will be in focus given the recent weakness of the economy. The labour market has been the strong point of the German economy, employment up 3.6% over the past 3 years. The unemployment rate is seen holding steady at 6.8%. Euro could prove vulnerable to rise in unemployment and/or the rate. USD: Revisions to the final quarter GDP are expected to see growth cut from 1.1% (annualised) to 0.5% in the final quarter of last year. If growth turns out nearer to the initial estimate, dollar should hold up well. The Fed Chairman speaks again today, but this brings lower risk of surprises, especially with yesterday’s testimony taken well. Idea of the Day We’ve remarked before just how all the interesting action in currency markets is happening beyond the dollar. This is even more notable given that budget battles continue unabated on Capitol Hill. The automatic spending cuts (known as sequester) are due to impact on Friday, amounting to USD 1.2trn. The dollar has been very relaxed for several reasons. The cuts are spread over the next ten years, so the pain is also spread. Any deal done after Friday could be back-dated. Finally, the market is now used to seeing politicians leave things until the last minute (or often beyond) and then stitching together a deal. This is the current betting, but it’s a risk and creates scope for greater volatility in March and beyond. LATES FOREX NEWS: EUR: ECB President Draghi was emphasising the fact that inflation is going to fall and also that Italy needs to implement reforms if it is to ever benefit from the ECB’s OMT programme. Single currency was supported into the New York close and beyond. JPY: Kuroda was confirmed as head of the Bank of Japan, as widely anticipated. He’s seen as supportive of further simulative measures from the Bank of Japan to support the economy and fight deflation. In theory, yen negative, but the currency has moved a lot in anticipation and now wants to see further measures to justify more weakness. GBP: Consumer confidence data overnight remained weak at -26 (same as previous month). Sterling is currently the weakest performer on the majors so far this year. The potential remains for a corrective bounce on cable, but for now it’s struggling to come through. AUD: Private sector capital expenditure data was weak, falling 1.2% on the quarter whilst private sector credit growth was soft, rising 0.2% MoM. The Aussie wanted to be weaker on this, but soon found buyers. Supporting the currency was news from RBA that 34 central banks round the world currently hold the Aussie in their reserves. AUD just below 1.03 vs USD.