Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 104.31 104.20-25 | EURUSD 1.35398 1.3540-50| EURJPY 141.243 141.12-22 | AUDUSD 0.87821 0.8775-80 | NZDUSD 0.82581 0.8258-63 | USDCAD 1.09638 1.0958-63 | EURCHF 1.23254 1.2330-35 | USDCHF 0.91022 0.9095-0.9195 | GBPUSD 1.64219 1.6416-26 | EURGBP 0.82457 0.8245-50 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               104.32 | 103.865

EUR/USD             1.3548 | 1.3508

EUR/JPY               141.11 | 140.33

AUD/USD            0.8805 | 0.8756

NZD/USD             0.8267 | 0.8231

USD/CAD             1.0970 | 1.0930

EUR/CHF              1.2338 | 1.2320

USD/CHF             0.9133 | 0.9100

GBP/USD             1.6423 | 1.6396

EUR/GBP             0.8248 | 0.82335

Overnight News

CNY:

China Q4 economic growth eases to 7.7 pct yr/yr

China Growth to Be Steady in 2014 -Official

China 2013 property investment up 19.8 pct y/y

China December Retail Sales +13.6% on Year, +1.24% on Month

JPY:

Japan to open door further to foreign workers for economic growth

Japan’s Abe suffers setback with Okinawa election loss

Japan to Proceed With Futenma U.S. Marine Base Move, Suga Says

Japan revised Nov industrial output edges down 0.1 pct m/m

AUD:

Australian Inflation on the Rise -TD Securities

GBP:

UK January Rightmove House Prices +1.0% On Month, +6.3% On Year

NZD:

Central New Zealand shaken by strong quake, no injuries

New Zealand December House Price Index Falls 1.0% M/M

For today

• EUR: With Martin Luther King bank holiday here one would have suspected a quiet session however, with continued concerns about the effects of Tapering, Europe’s ability to move out of the recession and it’s policy makers to agree on anything other than what beverage they will take with Lunch on the train/plane back to each person’s relative country the Euro came under pressure from the start of the day.  The weekend news that the French are not happy with the level of the Euro, and SNB’s Zurbruegg reiterating that the 1.20 EURCHF level remains in play as Europe’s woes continue unabated if you listen to what he has to say. The market treaded lower from the opening moving from the 1.3540 level, in line with Friday, to move through into the Tokyo session to a low below 1.3510 before holding and moving back to close to the opening levels. For the moment we are holding around the 1.3530 areas as we move towards London. With Light offers towards the 1.3600 level with only light mixture above that anything noteworthy could put the market back on the 1.3600 levels. However, the French having already made some comments this weekend on the subject of a strong Euro may again enter the fray with some verbal intervention. The downside is really no better for the moment with 1.3450 seemingly the key area with lows from Sep/Oct causing some congestion there and then the 1.3400 level likely to have plenty of Technical buyers appearing.
• GBP: Cable remained reasonably quiet with a brief move below the 1.6400 level as Euro’s dragged it lower, before finding itself just short of the opening 1.6420 areas as we move towards the grey hours. For the moment a limited upside potential technically however, as with all good plans of men and mice that’s not to say that bad news elsewhere could not force it to negate the current pattern, downside sees light bids around last week’s lows with 1.6200 figure the next key level.
• JPY: With the Chinese end of year getting closer, the market is already beginning to see some patchy periods however, today was not one of them with some healthy selling of USDJPY from the Tokyo opening particularly against the Euro, the market moved from the 104.30 highs just above the opening to move quickly to below 103.90 in the first hour of Tokyo’s official hours. The market recovered later in the session to above the 104.00 levels and as we move towards London holds around the 104.10 levels. For the moment there are light offers moving all the way back to the 104.80 levels and then the offers thicken with very little in the way of stops till above the 105.00 levels, even so offers outweigh the stops and those offers are thick to around the 105.50 areas. The downside for the moment has some mediums sized bids until around the 103.60 levels where some light stops make an appearance, then very little until we approach the 103.00 levels where some decent bids appear.
• AUD: The market saw some weak AUDJPY selling from the opening in Tokyo however, it was limited in impact and the Oz moved from the opening 0.8775 levels to just below the 0.8760 area before the supply ran out and the market began to reverse the movement with the cross moving away from the 91.00 areas it had almost broke through. The Oz moved back quickly from its lows helped by the CNY numbers with the market pushing briefly above the 88cent levels before falling asleep and drifting back to the opening levels where we move into the grey hours. With very little showing on the topside until beyond the 89cent levels the market is open for a good distance given the right circumstance however, it’s a US bank holiday so moves are likely to be limited outside the London session. Downside sees light bids towards the 0.9720 levels representing the lows from Jun 2012.

Today’s data

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

AUD       TD Securities Inflation M/M Dec A 0.70% | P 0.20%

GBP       Rightmove House Prices M/M Jan A 1.00% | P -1.90%

CNY        GDP Y/Y Q4 A 7.70% | C 7.60% | P 7.80%

CNY        Industrial Production Y/Y Dec A 9.70% | C 9.80% | P 10.00%

CNY        Retail Sales Y/Y Dec A 13.60% | C 13.60% | P 13.70%

JPY         Industrial Production M/M Nov (F) A 0.10% | C 0.10% | P 0.10%

07:00     EUR        German PPI M/M Dec C 0.00% | P -0.10%

07:00     EUR        German PPI Y/Y Dec C -0.60% | P -0.80%              

Weekend News

JPY/USD:

SoftBank Said to Enter Direct Talks on Sprint-T-Mobile Deal
JPY:

Japanese Cos. Using Local Currencies More in Financing: Nikkei
BOJ to Boost Loans to Lenders to Growing Industries: Nikkei
Abe: Wants to Make Decision on 10% Sales Tax This Year
Tepco May Spend 2.67 Trillion Yen to Expand Beyond Fukushima
CNY:

Shanghai Looks to Free-Trade Zone as Growth Target Held at 7.5%
China Home Prices Advance as Guangzhou, Shenzhen Jump 20%
China to Speed Up Modernization of Agriculture: Xinhua
China’s Zhejiang Reports 3 New Cases of H7N9: State Radio
Former Chinese Premier Wen Says He Never Abused Power: Ming Pao
USD:

IMF’s Afghan Chief, UN Workers among 21 Killed in Kabul Bomb
CHF/EUR:

SNB’s Zurbruegg Says Lingering Euro Risks Make Franc Cap Needed
EUR:

Ireland Rose to Investment Grade by Moody’s
European Banks Face $1 Trillion Gap before Review, Study Shows
PHP/CNY:

Philippines Invites China to Join Arbitration to Settle Dispute
GBP:

Britons Won’t See Acceleration in Wage Growth, Item Club to Say
Carney’s Comments on Banking Criticized by U.K. Labour Party: FT

Harry Hindsight

• EUR: The market was quiet through the Asian session with the range contained pretty much in a 10 pip market between the opening 1.3620 area and the lows around the 1.3610 levels. The move into London saw renewed weakness however, the market having broken through 1.3600 held around the level for much of the session with little data out of Europe. Slightly better than expected numbers out of the US started a USD rally, with the Euro dropping off through the 1.3580 and then being held for a few hours before renewing the move lower as some longs took back there positions with the upcoming long weekend in the States. Talk from both the Fed’s Plosser and Fisher who spoke of Tapering being complete by the end of the year at the latest. The market eventually touched below the 1.3520 levels with EURGBP reversing all of the week’s gains and a little more. The market regained a few pips into the close as light profit taking dominated the end of the session and we finished just off the lows around 1.3540.
• GBP: Despite some uncertain numbers over the week the market showed a stronger tone over the course of the day, having opened in the Asian session around the 1.6350 area the market drifted to a low below 1.6330 as EURGBP gave ground slightly in a thin market, only for the move into London and a good retail sales number for Dec showing vastly better than expected and confounding most of the doom sawyers. The market moved off its lows around the 1.6310 levels and immediately struck higher trading quickly above the 1.6430 levels and leaving the Euro to drift in its wake with the EURGBP dropping from the 0.8340 area to below 0.8270 in a straight move. While Cable traded around the 1.6440 level with attempts at the 1.6460 level failing several times the EURGBP continued to weaken as the Euro’s came under pressure from a resurgent USD. Cable eventually dipped to the 1.6410 levels holding to finish around 1.6410 into the close, while EURGBP continued lower to touch into the mid 0.8230’s to make the lowest it’s been since this time last year when the move higher occurred.
• JPY: While the USD was particularly strong in the later part of the day, USDJPY was an exception with the market unable to move above 104.50 and a long weekend affecting the willingness of the retail market to partake to some extent. The market opened around the 104.30 and remained stuck in a tight 10 pip range either side for the Asian session, London had one attempt higher however, that slipped back into the NYK opening and the market held around the 104.30 for the remainder of the day with very little interest in the Yen for a change.
• AUD: Interest in the Oz was limited and the market was on a back foot from the opening around the 0.8825 levels dipping in pre-Tokyo to 0.8815 even though the market again bounced to the opening levels it still struggled and the market saw some good AUDNZD profit taking moving into the market after the drop to just above the 0.8800 levels, the rise was limited in size and time with the market touching into the grey hours off the opening levels and the selling proper moved into the market. The market moved lower over the course of the day moving from above the 0.8820 level to touch the 0.8765 level in a limited action and again volumes seem to have been affected by the up coming long weekend.

Friday’s premiership results

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

JPY         Consumer Confidence Index Dec A 41.3 | C 43.4 | P 42.5

CHF        Producer & Import Prices M/M Dec A 0.00% | C 0.20% | P -0.10%

CHF        Producer & Import Prices Y/Y Dec A -0.40% | C -0.50% | P -0.40%

GBP       Retail Sales M/M Dec A 2.60% | C 0.50% | P 0.30%

USD       Housing Starts Dec A 1.00M | C 0.99M | P 1.09M

USD       Building Permits Dec A 0.99M | C 1.01M | P 1.01M

USD       Industrial Production Dec A 0.30% | C 0.20% | P 1.10%

USD       U. of Michigan Confidence Jan (P) A 80.4 | C 83 | P 82.5

Stay lucky

Andy