Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 99.237 | EURUSD 1.34856 | EURJPY 133.835 | AUDUSD 0.93598 | NZDUSD 0.8263 | USDCAD 1.04571 | EURCHF 1.23191 | USDCHF 0.91349 | GBPUSD 1.60572 | EURGBP 0.83988 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               99.735 | 99.135

EUR/USD             1.3499 | 1.3463

EUR/JPY               134.32 | 133.72

AUD/USD            0.9388 | 0.9336

NZD/USD             0.8358 | 0.8270

USD/CAD             1.0475 | 1.0440

EUR/CHF              1.2329 | 1.2315

USD/CHF             0.91535 | 0.9125

GBP/USD             1.6067 | 1.6027

EUR/GBP             0.8408 | 0.83975

For today

• EUR: The market closed close to its highs and the reopening saw the market again try to push higher but failing right below the 1.3500 level. The market drifted back slightly and the move into the Tokyo session was a little mute and only after an hour or so started to see ground given and a fall back into the mid 1.3460’s with decent volume flowing through the market. Euro’s failure higher was possibly down to the rise of the USDJPY in the Tokyo session as much as the straight Euro selling. As we move towards the grey hour’s volumes have started to fall back with the Euro’s on its lows around this mid 1.3460’s still with no meaningful news in the air.
• GBP: Having peaked into the close in NYK around the 1.6065 area the market drifted lower in Sydney and while the market moved a little higher in a follow through on the Tokyo opening, it drifted back into the 1.6035 area and so we remained for a good portion of the day with Cable active volume wise but inactive for the bulk of the day range wise. While we had the reiterations from Carney I’m happy to believe that the market was always set on moving back after the false moving lower.
• JPY: With USD supposedly looking weak USDJPY didn’t miss a beat from the low holding areas around 99.20 and the GDP figure coming in below the expectations. Good importer buying was seen in early trading however, this was overtaken by retail reaction to the numbers. Volume was strong, but the market continues to hold on that topside and we’ve drifted a little to the 99.60’s as we move towards London.
• AUD: The strong rally into the close left the opening around the 0.9360 area with initial cross selling in Sydney only for the market to be dragged a little higher as the AUDJPY broke through 93.00 triggering weak stops. The move into Tokyo saw the cross buying continuing taking the Oz to above 0.9385. AUDNZD buying also featured with the poor retail sales numbers triggering buying however, having touched the highs USDJPY continued higher with AUDJPY offers holding the market forcing the Oz to drop back to late NYK lows around the 0.9340. Volumes were reasonable but dominated by the mix of cross trading and for the moment we remain in the middle of nowhere.

USDJPY:
Topside: 99.70-100.00 medium offers 100.00-100.30 large mix
Downside: 98.80-99.20 light bids 98.50-98.80 light mix 98.20-98.40 light bids

EURUSD:
Topside: 1.3530-1.3560 light buy stops 1.3560-1.3580 medium buy stops 1.3580-1.3610 light mixed bag
Downside: 1.3400-1.3440 medium sized sell stops 1.3390-1.3400 light sell stops 1.3345-1.3375 medium bids

EURJPY:
Topside: 134.90-135.30 light offers
Downside: 132.50-132.90 light sell stops

AUDUSD:
Topside: 0.9340-0.9375 light offers 0.9400-0.9450 light mix
Downside: 0.9205-0.9270 medium bids

Overnight News

JPY:

Aso: Intervention a Necessary FX Policy Option for Japan

FX a transmission channel, not goal, of easy policy -BOJ

Japan Q3 GDP slows, consumption expected to pick up again

Japan business mood improves, seen rising further -Reuters Tankan

Japan EconMin: economy looking up, heading for ensured recovery

Suga Says Japan Economy on Uptrend; Will Promote ‘Third Arrow’

Japan revised Sept industrial output +1.3% MoM

CNY:

PBOC fixes yuan mid-point at record 6.1315/dollar

China money markets tense again after CB drains more funds

EUR:

ECB’s Praet Says Disagreement on Interest Rates Was on Timing

NZD:

NZ retail sales rise 0.3 pct in Q3

NZ consumer confidence at near 4-yr high in November- ANZ survey

Non-resident holdings of NZ debt edge lower in October – RBNZ

AUD:

Australian Senate Blocks Bid to Increase Debt Ceiling to A$500 B

Today’s data

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

NZD       Business NZ Manufacturing Index Oct A 55.7 | P 54.3 | R 54.2

NZD       Retail Sales Q/Q Q3 A 0.30% | C 0.90% | P 1.70% | 1.50%

JPY         GDP Q/Q Q3 (P) A 0.50% | C 0.40% | P 0.90%

JPY         GDP Deflator Y/Y Q3 (P) A -0.30% | C -0.50% | P -0.50%

AUD       Consumer Inflation Expectation Nov A 1.90% | P 2.00%

JPY         Industrial Production A 5.1% | P 5.4%

06:30     EUR        French GDP Q/Q Q3 (P) C 0.10% | P 0.50%

07:00     EUR        German GDP Q/Q Q3 (P) C 0.30% | P 0.70%

08:15     CHF        Producer & Import Prices M/M Oct C 0.30% | P 0.10%

08:15     CHF        Producer & Import Prices Y/Y Oct P 0.00%

09:00     EUR        ECB Monthly Bulletin

09:00     EUR        Italian GDP Q/Q Q3 (P) C -0.20% | P -0.30%

09:30     GBP       Retail Sales M/M Oct C 0.20% | P 0.60%

10:00     EUR        Eurozone GDP Q/Q Q3 (A) C 0.10% | P 0.30%

13:30     CAD       New Housing Price Index M/M Sep C 0.20% | P 0.10%

13:30     CAD       Trade Balance (CAD) Sep C -1.30B | P -1.31B

13:30     USD       Initial Jobless Claims (NOV 9) C 330K | P 336K

13:30     USD       Non-Farm Productivity Q3 (P) C 1.20% | P 2.30%

13:30     USD       Unit Labour Costs Q3 (P) C 1.00% | P 0.00%

13:30     USD       Trade Balance Sep C -$39.0B | P -$38.8B

16:00     USD       Crude Oil Inventories P 1.6M

Harry Hindsight

• EUR: A steady rise in early trading but nothing convincing through Asia, moving from the opening 1.3435 area to push initially above the 1.3450 into the grey hours. Once the highs were made the market started to drift with German officials lowering GDP expectations falling back 0.10% for this year and next. With the Euro dipping to the 1.3410 area the only thing that really kept it afloat at the time was a rampant GBP. With expectations of a dovish commentary from Yellen the market in NYK initially started to sell the USD’s. Comments from Barroso concerning the German surplus, and it would seem by his logic that Germany not having one would make a happy Europe, whether by this he means Europe wouldn’t be buying German goods so therefore not going into debt or he’s still lost in space as with his previous comments on the Civil war history calls WWII. The market twisted and turned over the next couple of hours as the market fell from the then highs above 1.3450 to below 1.3400 and then reversed with what I can only assume were rumours for the coming Yellen speech. The market had again pushed above the 1.3450 level and indeed touched 1.3470 and steadied to minor moves between those two areas before Yellen’s statements were released giving us a last 30min move higher to the 1.3490 level into the close.  While trading in Asia and London was fairly muted and volumes below normal the back end of London and the NYK session filled the gap with large mixture of weak stops and algo type selling only to whipped the other way and leaving the market empty for the final 30mins of rally into stiff offers on the topside.
• GBP: Cable opened around the 1.5900 area and slipped down to the 1.5890 areas, Asia remained very quiet with little going on in the session GBP wise with the damage done the previous day with improving inflationary news, the knee jerk reaction for the GBP lower was really unwarranted and the numbers that were to be watched turned out to be the employment numbers that have been the focus of Carney’s attention. The move into London after a tight 20 pip range on the wide saw the market move sharply when the figures were released rising quickly to 1.5940 and a follow through as Eurozone IP numbers came in worse than expected and EURGBP dropped quickly. EURGBP had dropped from above the 0.8450 area to an initial 0.8430 before tipping over and dropping quickly to below 0.8380 as weak stops were triggered, the cross bounced a little to above the 0.8410 before hovering around the 0.8400 for the next few hours. The bounce in the moves later in the Euro had little effect on the Cable which rose to above 1.6040 on Euro’s resurgence and continued rising to top into the close above the 1.6060 levels. Carney again reiterated that interest movements are controlled more by employment numbers than the inflationary ones and 2014 is the point he believes is closer to the right time.
• JPY: USDJPY struggled throughout the day, not so much on USD weakness but more as a result of struggling to break through the topside barriers. The market opened above 99.60 and was never able to really get going after the previous day’s movement taking a lot of liquidity from the market. Retail Japan was active however, volumes were much reduced from the previous few days and we drifted lower through the session to touch below 99.45 before rising back to the 99.60 into early London. There was no respite for the pair in London either with the rise in Cable forcing the pair through for new lows then the choppy market in Euro causing similar affects. The USD selloff towards the close sent the market to the lows for the day after a reasonably choppy session and we moved into the supporting bids around the 99.10 area into the close bouncing around a 20 pip range for several minutes in the rush.
• AUD: As with the rest of the market the Oz traded in a narrow range during Asia moving from the opening 0.9300 the market initially pushed lower through 0.9290 into early Tokyo with AUDJPY selling appearing. Having moved back to close to the 0.9310 area we stayed in a very tight range into the London session, grey hours selling kicked in as early leveraged types took a fancy for a run lower and we moved steadily to breach the previous low then bouncing off we started to a move steadily higher, it wasn’t all one way however, a setback in early NYK sent the Oz towards its lows before again bouncing and this time running to above 0.9330 before stalling and waiting for the Yellen comments. The move into the close was quick and savage with the market moving from the holding 0.9330 area to above 0.9370. As with the rest of the market we were caught with unsurprising comments of Yellen supporting the Fed’s easing policies and as with Carney the focus remains mostly with employment figures. However, the kicker seemed to be the comment that the “economy is performing far short of the potential”.

Yesterday’s premiership results

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

AUD       Westpac Consumer Confidence Nov A 1.90% | P -2.10%

JPY         Machine Orders M/M Sep A -2.10% | C -2.00% | P 5.40%

JPY         Domestic CGPI Y/Y Oct  A 2.50% | C 2.50% | P 2.30% | R 2.20%

GBP       Claimant Count Change Oct A -41.7K | C -30.0K | P -41.7K

GBP       Claimant Count Rate Oct A 3.90% | C 3.90% | P 4.00%

GBP       ILO Unemployment Rate 3M Sep A 7.60% | C 7.70% | P 7.70%

EUR        Eurozone Industrial Production M/M Sep A -0.50% | C -0.30% | P 1.00%

USD       Monthly Budget Statement Oct A -91.6B | C -102B | P -$120.0B

Good Luck

Andy