Daily FX Market Commentary

Andy Harrison

Good Morning,

For Today

• GBP: A reasonably quiet session with the market opening around the 1.3640 level rising slowly through into the Tokyo session pushing towards the 1.3655 area before slipping back and then dipping quickly through to the 1.3620 area bouncing back to the 1.3650 and then holding quietly around the 1.3640 area for the move into the grey hours, Topside offers through the 1.3700 level with weak stops likely on a move through the 1.3720 area to quickly test through to the 1.3750 area and some limited offers likely and increasing offers through to the 1.3800 area and stronger congestion likely from there on, downside bids light back through the 1.3600 level with weak stop light through the level and light bids through the sentimental levels before stronger bids appear around the 1.3450 level.
• JPY: Quiet opening and trading through to the Tokyo session before dipping through to the 103.80 for the early lows, the market held around the opening 103.90 areas through to midsession and a quick move higher through to the 104.20 area before dipping through to the 104.00 level for the move through to the grey hours, topside congestion around the 104.40-60 area and then increasing into the 104.80 level with strong offers through the 105.00 area, Downside bids light through to the 103.00 level before stronger bids start to appear and increase through to the 102.50 area with very little in the way of stops on a dip through with likely increasing bids to the 102.00 areas and likely to see stronger bids continuing from importers.
• AUD: Opening just above the 0.7730 area the market slowly rose through into the Tokyo session testing through the 0.7750 area peaking around the 0.7755 level before USD buying quickly dipped the market through the 0.7730 area and from midsession onwards slowly rising through to the 0.7750 area again for the move into the grey hours, light bids into the 0.7700 area and then a little patchy through to the 0.7660-40 area with stronger bids on a move through to the 0.7620 level with weak stops likely through into the 0.7580 area and the market then congested through sentimental levels. Topside offers into the 0.7780 area likely to be quite strong through to the 0.7820 area before option barriers are likely to be cleared and break out stops join weak stops for a strong move through to the 0.7850 area however, congestion is likely to kick in from there through to the 0.7880 area and increasing into the 79 cents level before the topside opens up for a move towards the 80cents level.
• EUR: A slow rise through into the Tokyo session testing the 1.2170 level and a couple of attempts at a push through before dipping on a quick USD buy and the market testing through the 1.2140 level before ranging quietly just below the 1.2150 area to the grey hours, Topside offers light through the 1.2220 area and continuing lightly through to the 1.2250 area where the market starts to thicken a little on the offer and the closer the market moves to the 1.2280 area the stronger the offers, a push through the 1.2300 area will likely see stronger offers building with short term sellers likely joining the queue with weak stops on a strong push through the 1.2320-30 areas opening only to the 1.2350 areas. Downside bids getting stronger the closer the market gets to the 1.2120 area with likely stronger congestion through the area and strong stops on a push through the 1.2080 area with very limited bids to support the market through to the 1.20 handle.

Overnight News

USD/CNY:
US bans all imports of cotton and tomato products from Xinjiang, citing allegations of forced labour – SMP
US is said to decide against investing ban on Alibaba – Tencent
EUR:
ECB’s Hint at considering inflation overshoot may cap Euro – BBG
ECB’s Lagarde demands action on bitcoin “funny business” days after the UK’s City watchdog gave warnings – DML
Lagarde reiterates the ECB is monitoring exchange rate movements carefully, like the BoJ?
Italy plunged into political crisis, government risks collapse
USD:
Federal authorities warn that the Capitol breach will be a significant driver of violence – NYT
Once Trump leaves office, the senate can’t hold an impeachment trial – WPT
Trump amends securities investment order on China military co’s – BBG
Biden aides tell congress allies aid plan may be about $2t – CNN
SEK:
Riksbank begins transition to fully self-financed FX reserve RTR’s
AUD:
Aussie 3-6 month note auctions print negative yields again – BBG
The AUD 200b savings war chest to drive economic recovery – AFR
CNY:
Decoupling could be death knell for European firms in China – SCMP
WHO:
Convenes emergency committee early over coronavirus variants as it finally works out that Virus’s change roughly every 90 days
GBP:
UK’s Johnson warns against unthinking Sinophobia in China ties – AFP

Today’s Data
NZD Building Consents MoM (NOV) A 1.2% | P 8.8% | R 8.9%
GBP RICS House Price Balance (DEC) A 65% | C 62% | P 66%
CNY Exports YoY (DEC) A 18.1% | C 15.0% | P 21.1%
CNY Imports YoY (DEC) A 6.5% | C 5.0% | P 4.5%
CNY Trade Balance (USD) (DEC) A 78.17b | C 72.35b | P 75.40b
0700 EUR German GDP (QoQ) A | P 8.5%
1230 EUR ECB Monetary Policy Statement
1330 USD Export Price Index MoM (DEC) A | C 0.5% | P 0.6%
1330 USD Import Price Index MoM (DEC) A | C 0.6% | P 0.1%
1330 USD Initial Jobless Claims A | C 780k | P 787k
1600 USD FOMC Member Bostic Speaks
1730 USD Fed Chair Powell Speaks
1800 USD FOMC Member Kaplan Speaks

Harry Hindsight

• GBP: Opening around the 1.3665 area and a slow push through into the Tokyo session eventually testing to the 1.3695 area before drifting through to the grey hours, early buyers through into the London session saw the market testing the 1.3700 level for the first time and having failed dropping quickly back through the opening levels, another slow rise saw the market holding the 1.3680 area for an hour before running at the 1.3700 level for the second and final time and failing again back to the 1.3650 area for the move into the NYK session, a minor rise saw limited interest and the Cable started dropping back to test to the 1.3620 area and a slow range around the 1.3635 area.
• JPY: Initially light and early buyers bought into light offers before settling down to trade around the 103.80 area through into the Tokyo session slowly slipping lower through to the 103.50 area for the lows of the day moving through mid-Tokyo slowly recovering and the move into the London session recovering through to the 103.80 level and eventually pushing through to the 104.00 level however, it failed to push on and dipped back to range through to the close in the 103.90 area with minor deeper dips but returning each time to finish around that level.
• AUD: Early highs into the Tokyo session saw the AUD above the 0.7780 area and then the range narrowed down through to the 0.7760 lows and the move into the grey hours, the move into London saw the market again testing the highs before again failing dipping back to the 0.7750 areas holding briefly then slowly drifting though to test below the 0.7720 area and ranging around the 0.7740 area to the close.
• EUR: A limited rise through the Asian session pushing slowly from the 1.2210 area to test the 1.2220 levels however, London came in selling and the Euro dropped back through to the 1.2180 area in the first hour not stopping but slowing the descent eventually ranging around the 1.2170 area through into the NYK session and holding around the level until the London close where talk of overshooting inflation would be the goal for the ECB to cheapen the servicing plan, it will be interesting to see who gets put on the FX manipulation list in the coming months. London close saw the market dipping to the lows around the 1.2140 area before recovering to the 1.2170 and a slower drift to the close.

Premiership Results
EUR ECB Lagarde Speaks
EUR Industrial Production MoM (NOV) A 2.5% | C 0.2% | P 2.1% | R 2.3%
USD Core CPI YoY (DEC) A 1.6% | C 1.6% | P 1.6%
USD Core CPI MoM (DEC) A 0.1% | C 0.1% | P 0.2%
USD CPI MoM (DEC) A 0.4% | C 0.4% | P 0.2%
USD FOMC Member Bullard Speaks
USD Crude Oil Inventories A -3.247m | C -2.266m | P -8.010m
USD FOMC Member Brainard Speaks
USD Beige Book
USD Federal Budget Balance (DEC) A -144b | C -200.0b | P -145.0b
USD FOMC Member Harker Speaks
USD FOMC Member Clarida Speaks

Best Regards
Andy

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