Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.618 | EURUSD 1.38053 | EURJPY 141.666 | AUDUSD 0.93661 | NZDUSD 0.85982 | USDCAD 1.10269 | EURCHF 1.22182 | USDCHF 0.88506 | GBPUSD 1.68235 | EURGBP 0.82057 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.70 | 102.495

EUR/USD             1.3820 | 1.3798

EUR/JPY               141.775 | 141.62

AUD/USD            0.9377 | 0.9277

NZD/USD             0.8620 | 0.8587

USD/CAD             1.1039 | 1.1027

EUR/CHF              1.2219 | 1.2209

USD/CHF             0.88515 | 0.8836

GBP/USD             1.6836 | 1.6820

EUR/GBP             0.8210 | 0.8203

For today

• EUR: The Euro refused to move below the 1.3800 level in quiet trading although we did hold towards the area for several hours into the Tokyo session. A good set of Oz inflationary numbers left the market in the Euro able to rise as the cross EURAUD market led to a general rally against the AUD, moving the Euro off the 1.3800 level to the high teens over the course of a short period. Offers remain around the 1.3830 area for the time being with weak stops behind until the 1.3860 area where fresh offers are likely building all the way back to 1.3900 levels. Downside sees light bids to the 1.3780 levels with a mixture thereafter into the 1.3750 levels where bids start to dominate to 1.3720.
• GBP: Movement in the GBP was similar to the Euro opening around the 1.6825 level the market made its way steadily into the Tokyo session and moved higher to above the 1.6835 levels with the AUD releases, there was a brief spike lower as someone got it wrong to set the low just above the 1.6820 level but the market now continues to hold above the 1.6830 as we head towards the grey hours. Offers appear above the 1.6840 area however, they are likely to be lighter than previous as the offers back off in front of the Pfizer-Zeneca news, offers will probably be stronger towards the 1.6860-90 area with weak stops likely to build above that level. Downside sees bids around the 1.6780 level however; beyond that becomes a mixture and again the Pharmaceutical news will dominate the market if it goes the wrong way.
• JPY: The early market was fairly well bid as the market attempted to recapture the 102.70 levels in the early play however, the market ran out of time and we started to see some profit taking in the AUDJPY carry trade as longs began to liquidate in front of the numbers, pushing the market slightly lower and back to the opening levels. The release saw some reasonable selling kicking in but nothing too large and the market was set back to the 102.50 levels. Bids appear below the 102.30 levels and although it is a little mixed the market has a bias for the moment to bids to the 102.00 levels, with stops then taking over below the level to 101.70 and light bids reappear. Topside offers remain intact above the 102.70 levels and get larger as you approach the 103.00 level with weak stops behind, more offers appear around the 103.20 level similar to the first group however, stops are few and far between from there.
• AUD: The market traded quietly from the opening 0.9365 levels and headed slightly higher to the 0.9375 area before the release, on the release the market dropped quickly gapping from the highs to the 0.9345 area and tumbling quickly to the 93cent triggering stops quickly before holding for an hour or so before the market tumbled for a second time as the analysts pushed out their research telling the market what they had already gleaned from the move. Dipping inflation will allow the RBA to cut rates if necessary to combat any further strength in the AUD or so the story goes, whether they’d be tempted at short notice would be doubtful for the time being and given the back drop of falling interest rates in most large economies it may be a last resort at best. With the downside somewhat cleared out the market has light bids from here to the 0.9280 levels before the mix takes over and no clear definition, 0.9250 provides a better base with a deeper set of bids likely to the 0.9200 levels before stops start to appear in earnest as we pass through the break up point of last month, leaving 0.9150 exposed. Topside has over from the 0.9380-0.9400 level left in the market and whether they will drift lower remains to be seen.

Overnight News

AUD:

Australia inflation surprisingly low in Q1

CNY:

HSBC China April Flash Manufacturing PMI 48.3, Matching Estimate

China Large-scale Consumption Stimulus Not Likely: Sec. News

JPY:

Japan inflation may have beat BOJ forecast Kuroda

Kuroda: BOJ’s QQE Purchases of JGB’s Not Deficit Financing

Nakaso Thinks Japan Economy Resilient Enough to Absorb Tax Hike

Meiji Yasuda Life to Boost Japan Bond Holdings in Fiscal 2014

USD/JPY:

Obama Supports Abe’s Effort to Exercise Defence Right: Yomiuri

NZD:

N.Z. March Permanent Immigration Is Highest Since February 2003

Today’s data

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

AUD       CPI Q/Q Q1 A 0.60% | C 0.80% | P 0.80%

AUD       CPI Y/Y Q1 A 2.90% | C 3.20% | P 2.70%

AUD       CPI RBA Trimmed Mean Q/Q Q1 A 0.50% | C 0.70% | P 0.90%

AUD       CPI RBA Trimmed Mean Y/Y Q1 A 2.60% | C 2.90% | P 2.60%

AUD       CPI RBA Weighted Median Q/Q Q1 A 0.60% | C 0.70% | P 0.90%

AUD       CPI RBA Weighted Median Y/Y Q1 A 2.70% | C 2.90% | P 2.60%

CNY        HSBC China Manufacturing PMI Apr (P) A 48.3 | C 48.3 | P 48

07:00     EUR        French Manufacturing PMI Apr (P) C 51.9 | P 52.1

07:00     EUR        French Services PMI Apr (P) C 51.3 | P 51.5

07:30     EUR        German Manufacturing PMI Apr (P) C 53.8 | P 53.7

07:30     EUR        German Services PMI Apr (P) C 53.3 | P 53

08:00     EUR        Eurozone Manufacturing PMI Apr (P) C 53 | P 53

08:00     EUR        Eurozone Services PMI Apr (P) C 52.5 | P 52.2

08:30     GBP       BoE Minutes C 0–0—9 | P 0–0–9

08:30     GBP       Public Sector Net Borrowing (GBP) Mar C 8.5B | P 7.5B

10:00     GBP       CBI Trends Total Orders Apr C 7 | P 6

12:30     CAD       Retail Sales M/M Feb C 0.50% | P 1.30%

12:30     CAD       Retail Sales Less Autos M/M Feb C 0.50% | P 1.00%

14:00     USD       New Home Sales Mar C 450K | P 440K

14:30     USD       Crude Oil Inventories P 10.0M

Harry Hindsight

• EUR: While the market was back from the break the volumes were still lower than you would expect. Asia remained quiet moving around the 1.3795 levels for the greater portion of the session making minor moves to the 1.3790 levels but making no real commitment to the downside. Grey hours saw the first attempt lower moving quickly to below the 1.3790 lows in Asia but unable to get through 1.3785 levels, before bouncing back and pushing above the 1.3805 level into the London official opening. The session from then on and into the NYK opening was steady buying as the real money caught up with normal operations and the market pushed steadily higher to the 1.3825 levels and just short of the waiting offers. With a slightly better than expected housing numbers in the US the market saw USD resurgent into the NYK session and the Euro again backed off to the 1.3790 levels however, like earlier in Asia there was not enough interest to put the pair any lower and the move to the close was a steady recovery to above the 1.3800 levels.
• GBP: Like the Euro during Asia the market in Cable was very quiet with a minor dip into the upper 1.6780’s only to move back to the 1.6795’s for the rest of the session and in line with the opening levels. Grey hour buying in light of the Pfizer-Zeneca discussions with an new bid expected of around the £76B mark being talked about and supportive of GBP, but not the economy. The market moved into the London session pushing above the 1.6815 levels and quickly moved to the 1.6835 level and making a high in early NYK at the 1.6840. When the US figures did appear the effect was not so noticeable for the Cable and the pullback was only to the 1.6815 level and a quiet range of 1.6815-25 for the close. EURGBP pushed through the supportive bids around the 0.8200 levels however, with light volumes across the market it was unable to push through a lively bid at the 0.8198 level spending a couple of hours sat on the level as the selling was absorbed, eventually the market moved back away and settled around the 0.8205 levels support area dating from the end of February.
• JPY: The Asian session saw Japanese banks again willing buyers however, the topside offers remained intact as the market with only light volume was unable to push through the 102.70 level and held for the best part of the session around the 102.60-70 areas. With Asia unable to get through to the topside the immediate reaction of the new week for Europe was to sell USDJPY causing a minor dip lower through the 102.55 levels and triggering weak stops to the 102.40 level into the London official opening. Once the push lower was finished with the market then spent much of the day slowly grinding back to above the 102.60 levels with no real help from US numbers to finish the day around the opening levels.
• AUD: The Oz had a quiet steady day rising in the early part of the session with Leading index coming in slightly stronger however, the overall affect was to take the pair from the 0.9330 levels to 0.9360 with a lack of offers really to blame for the move than anything meaningful really going through. The move into London left the market moving around the topside with little conviction and once the US figures were released the high was mad around the 0.9378 area before drifting off to settle in the mid 60’s.

Yesterday’s premiership results

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

AUD       Conference Board Leading Index Feb A 0.30% | P 0.20%

CAD       Wholesale Sales M/M Feb A 1.10% | C 0.70% | P 0.80% | R 0.50%

USD       House Price Index M/M Feb A 0.60% | C 0.50% | P 0.50% | R 0.40%

USD       Existing Home Sales Mar A 4.59M | C 4.55M | P 4.60M

EUR        Eurozone Consumer Confidence Apr (A) A -9 | C -9 | P -9

Good Luck,

Andy