Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.244 | EURUSD 1.14111 | EURJPY 136.071 | AUDUSD 0.78173 | NZDUSD 0.7529 | USDCAD 1.23884 | EURCHF 1.06933 | USDCHF 0.93692 | GBPUSD 1.53525 | EURGBP 0.74334 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.36 | 118.88

EUR/USD             1.1416 | 1.1398

EUR/JPY               136.08 | 135.675

AUD/USD            0.7832 | 0.7804

NZD/USD             0.7546 | 0.7531

USD/CAD             1.2404 | 1.2381

EUR/CHF              1.06965 | 1.0633

USD/CHF             0.9372 | 0.9316

GBP/USD             1.5361 | 1.5346

EUR/GBP             0.7435 | 0.7423
For today

• EUR: Another quiet session for the Euro as the market remains on the side lines and awaiting some kind of resolution to the Mexican standoff between the Euro Group (EG) and Greece, with Greece requesting a bailout extension under the terms of (Moscovici plan) which has already been rejected by the EG early last week, with the Greek PM Tsipras saying his country “will not accept an ultimatum but will negotiate as an equal partner” How he works that out I’m not sure as obviously at the moment Greece is far from being an equal partner unless we are talking about a different weight measure, EG offered an extension on the existing terms, so like a one sided poker game Greece are down to the last chip and covering the pot is likely to be a long drawn out affair with time running out before the creditors come to grab that chip. The topside offers from the 1.1450 levels build steadily to a strong offering into the 1.1500 areas and an already double top requiring a strong and determined market to push through the level and likely stops into the 1.1520-30 areas, then an open run to the 1.1600 a possibility of course this would likely require EG and Greece meeting somewhere in between both stances, tall order? Downside has light bids through the 1.1350 levels and these bids are likely to extend into the 1.1270 levels before the market  opens to the possibility of decent stops and a move through likely trading to the 1.1220 and bids reappearing but leaving the 1.1100 once again vulnerable.
• GBP: Slightly more movement in the Cable but you would need to look closely, the market opened around the 1.5350 levels and initially drifted below the level into the mid 1.5340’s before rising back above 1.5350 and touching above 1.5360 as weak shorts exited and then remaining in a tight 1.5350-60 area as we head towards the grey hours. Topside offers into the 1.5400 levels seems to be containing the market for the moment with reasonable supply into the level for the moment, a push through the level will likely see a run of stops opening up the market for a test of the 1.5500 levels and the highs of the year around 1.5600 becoming vulnerable. Downside has light bids through the 1.5300 level before the downside becomes a little stronger however, with BoE’s Carney more or less nailing his predictions on inflation the market is not overly concerned as long as other economic factors continue to improve. Through 1.5250 though the tone of the market changes and although 1.5200 is a strong level it would for the moment be against the flow of fundamentals and leave the downside open.
• JPY: USDJPY drifted in pre-Tokyo from the opening 119.20 area slipping back to the Tokyo opening only a little lower rising in the opening to push steadily over several hours to the 119.35 areas and into the unchanged news the market had expected, the market dropped off to the 118.90 before recovering instantly back to the 119.10 levels and holding for a few hours as the news machine started to spin out its expectations for the Commentary due out at 0630GMT by Kuroda, for the moment the market has traded quietly since the release of the vote at 8-1 in favour of not changing. As we move towards the Kuroda speech the market has held the 119.00-10 areas and been very quiet. Topside offers remain in the 119.40 areas and although a push through there will likely see some weak stops the 119.80-120.00 level is likely to be a stronger level with little room on the topside for stops with those offers likely to continue into the 120.40 level and only a push through the 120.80 is likely to open the market for an attempt for a break to open the 121.00 levels. Downside has limited bids into the 118.50 levels with the market likely to see bids through to the 117.00 level as the market moves into a very congested area were the market has been generally trading for the past month or so.
• AUD: A very quiet day for the Oz with very little to help the market along, the market opened around the 0.7815 areas and although dipped into the leading index and through towards the 78 cent level it recovered on a better number and although it’s not been awe-inspiring the market has slowly moved into a 0.7820-30 range for the moment.  Topside still sees the 0.7850 as the bone of contention as its been for the most part this month having only lightly pushed through the level on previous attempts however, a good strong break and 0.7880 levels open with light offers into the 79 cent level and the possibility of strong stops appearing 0.7920-40 areas. Downside is the side that the RBA would be more interested in and I’m sure there determination would kick in if the market rose too much so, this still leaves the market continuing to consolidate in this 77-78 cent range with bids into the 0.7750 level and increasing in size down to 77 cents a break through there is likely to see weak stops from the fresh longs and this could see the market move quickly to surprise before running into very strong bids the more you push through the 0.7650 level.
• CHF: Talk of SNB reducing rates further into the negative territory have kept the market jumpy add to which the EG/Greece running commentary leaves the market looking for a safe haven which we know is not the CHF, EURCHF today has seen a better range that the USDJPY as the market jumps around and not a pair for the faint hearted one would have to say.

Overnight News

JPY:

BOJ maintains stimulus, revises up view on output – RTRS

Kuroda Says FX That Reflects Fundamentals Isn’t Bad for Japan

Kuroda Says No Need for Extra Action as No Change in Price Trend

Kuroda: Won’t Hesitate to Make Adjustments If CPI Trend Changes

Japan Post seeking big payouts via risky investments

Japan’s Small Companies Must Cope With Weak Yen: SME Association

Japan Auto Workers Seek Pay Raise to Share in Record Car Profits

JPY/AUD:

Japan Post to Buy Australia’s Toll Holdings for $5.1 Billion

AUD:

RBA’s Edwards Says Rate Cuts Help Pressure Currency Lower

EUR:

Schaeuble: Greece Must Offer Reliable, Concrete, Binding Plan

Greece Should Exit Euro, Return to Drachma, Sinn Tells PNP

GBP:

Osborne Said to Anger Finance Ministers Questioning Greek Plan B

Today’s data

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

AUD       Conference Board Leading Index Dec A 0.40% | P 0.10%

AUD       Westpac Leading Index M/M Jan A 0.10% | P 0.00%

09:30     GBP       Jobless Claims Change Jan C -25.2K | P -29.7K

09:30     GBP       Claimant Count Rate Jan P 2.60%

09:30     GBP       ILO Unemployment Rate 3M Dec C 5.80% | P 5.80%

09:30     GBP       Bank of England Minutes

09:30     GBP       MPC Official Bank Rate Votes C 0–0—9 | P 0–0–9

09:30     GBP       MPC Asset Purchase Facility Votes C 0–0—9 | P 0–0–9

10:00     CHF        ZEW (Expectations) Feb P -10.8

13:30     CAD       Wholesale Sales M/M Dec C 0.40% | P -0.30%

13:30     USD       Housing Starts Jan C 1070K | P 1089K

13:30     USD       Building Permits Jan C 1066K | P 1032K

13:30     USD       PPI M/M Jan C -0.40% | P -0.30%

13:30     USD       PPI Y/Y Jan P 1.10%

13:30     USD       PPI Core M/M Jan C 0.10% | P 0.30%

13:30     USD       PPI Core Y/Y Jan P 2.10%

14:15     USD       Industrial Production Jan C 0.40% | P -0.10%

14:15    USD       Capacity Utilization Jan C 79.90% | P 79.70%

21:00    USD       Net Long-term TIC Flows Dec C 41.3B | P $33.5B

Harry Hindsight              

• EUR: Euro’s opened around the 1.1350 levels and traded lower into the Tokyo session with EURJPY doing some work to the downside and taking the Euro into Tokyo to the 1.1320’s before a steady climb through the remainder of the session into the grey hours. The move into the London session saw the market again below the opening having drifted in the grey areas from the mid 1.1360’s as light selling emerged in the market. UK numbers sent EURGBP higher and the Euro quickly moved to the 1.1380 level and a steady grind through the offers over the next 10 pips before pushing through the 1.1400 and some light stops, Eurozone numbers were mostly ignored and German ZEW figures faced the same lethargy when released however, the rally continued albeit slowly to make the highs just below the 1.1450 areas before slowly moving back below the 1.1400 levels into the NYK session. A late rally into the NYK option cut saw some movement however, the day was fairly dull as the market waited for news of EG/Greece with it would seem both later issuing statements that deals on the tables are good till Friday and a question of who blinks first. The market eventually narrowed down to trade just above the 1.1410 level into a quiet close with the balance of the week likely to be no less exciting as the Chinese NY bites into the market until next week.
• GBP: Inflation data for the day limited the movement of the Cable to some respects with Asia markets seeing Euro dragging the pair with it as it initially moved lower and then a steady climb of the 1.5350 levels and through the opening 1.5360’s to make a weak attempt to push through the 1.5380 levels. Pre-London as the market started to sit at their desks saw the market tick down and into the official opening unchanged on the day. The release of the numbers saw the headline number in line with expectations and the market having initially dipped to the 1.5330’s quickly rallied back to the 1.5360 as the doomsayers quickly matched and removed from the market as 1.5380 was again touched. While Cable was doing ok the EURGBP was moving higher as the market pushed above the 1.1400 with the cross moving from below 0.7390 and trading quickly to 0.7430 before stabilizing. Cable eventually touched lightly through the 1.5400 levels as the market ground through offers into the level however, although it sneaked through the 4 hours it took had its toll on the market as it ran into the NYK session fresh back from its break, they were less impressed with the numbers and started selling before the official bell taking the market steadily into the opening areas again slowly pushing through the 1.5350 and this time finding weak stops through the level and a steady push to 1.5340 suddenly found very little to support the market until the 1.5320’s. The recovery was gradual and took the market into a 1.5350-60 range for a long run to the close with volumes light at best to the close.
• JPY: USDJPY did very little in the pre-Tokyo session opening around the 118.50 levels and holding in the area until the Tokyo session started and then quick EURJPY selling saw the market in USDJPY quickly into the 118.20’s as the possible repatriation begins to kick in, the market then spent several hours moving steadily back to the opening levels, a breakthrough of the 118.50 levels saw weak stops cleared and 118.60 trading and that was it for Asia, grey hours saw the market drifting and only once London opened did the market start to see a recovering EURJPY and USDJPY market, with the pull of the EURJPY taking the USDJPY leg with it and a steady climb through the UK and European numbers touching lightly through 118.90 before seeing a similar drift into the NYK session. A weak start for the NYK session saw the market eventually start a steady climb with the market far too close to 119.00 for the market to ignore the level and it pushed through to the 119.10 levels initially and held that area until London disappeared and what seemed to be the counterbalance to the buying in general and the market moved quickly to the 119.40, as with the rest of the market though once the highs were made the market drifted for a long run to close with the market finishing around the 119.20’s in slow trading.
• AUD: The market opened around the 0.7770 levels and traded lower from the start with position cutting in front of the RBA minutes and although the market traded back to the 0.7750 activity was limited at best, the announcement saw very little that we didn’t expect and while some may have thought the possibility of a further cut was available it was squashed again as they continue to evaluate the last cut and will remain static for the moment, if memory serves the projected period was till May however, as with the previous statement that is dependent on results from the last cut and whether it will be required in the future. The market as is want in the Oz saw sellers spike it lower to the 0.7740’s before the market rebounded and pushed straight back through the 0.7780 levels and then a steady climb to the 0.7790 area and light stops and volumes took the market through the 78 cent level and job done. Good buying in the carry trade again saw yield buyers out in force and the movement of USDJPY saw the movement filter through to send the Oz steadily higher over the course of the day with only really periods of dull drifting as the focus moved to other currencies. Apart from the NYK numbers the Oz remained firmly above the 78 cent level holding in the mid teen’s into a quiet close and little interest from anyone other than the Japanese.

Yesterday’s premiership results

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

GBP       CPI M/M Jan A -0.90% | C -0.80% | P 0.00%

GBP       CPI Y/Y Jan A 0.30% | C 0.30% | P 0.50%

GBP       Core CPI Y/Y Jan A 1.40% | C 1.30% | P 1.30%

GBP       RPI M/M Jan A -0.80% | C -0.70% | P 0.20%

GBP       RPI Y/Y Jan A 1.10% | C 1.20% | P 1.60%

GBP       PPI Input M/M Jan A -3.70% | C -2.10% | P -2.40% | R -3.30%

GBP       PPI Input Y/Y Jan A -14.20% | C -11.90% | P -10.70% | R -11.60%

GBP       PPI Output M/M Jan A -0.50% | C -0.20% | P -0.30% | R -0.50%

GBP       PPI Output Y/Y Jan A -1.80% | C -1.40% | P -0.80%

GBP       PPI Output Core M/M Jan A 0.20% | C 0.10% | P 0.00%

GBP       PPI Output Core Y/Y Jan A 0.50% | C 0.40% | P 0.80%

GBP       DCLG UK House Prices Y/Y Dec A 9.80% | C 10.30% | P 10.00%

EUR        German ZEW (Economic Sentiment) Feb A 53 | C 55 | P 48.4

EUR        German ZEW (Current Situation) Feb A 45.5 | C 30 | P 22.4

EUR        Eurozone ZEW (Economic Sentiment) Feb A 52.7 | C 51.3 | P 45.2

CAD       International Securities Transactions (CAD) Dec A -13.6B | C 5.35B | P 4.29B

USD       Empire State Manufacturing Feb A 7.8 | C 9 | P 9.95

USD       NAHB Housing Market Index Feb A 55 | C 58 | P 57

Good Luck,

Andy