Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 114.604 | EURUSD 1.11554 | AUDUSD 0.71377 | NZDUSD 0.66555 | USDCAD 1.3832 | USDCHF 0.98705 | GBPUSD 1.44346 |

LMAX Highs and Lows 6am

                                High | Low

EURUSD               1.1184 | 1.11471

USDJPY                 114.875 | 114.297

GBPUSD               1.44581 | 1.44179

AUDUSD              0.71768 | 0.7130

USDCHF               0.98858 | 0.98564

USDCAD               1.38443 | 1.3750

NZDUSD               0.66751 | 0.66905

EURGBP               0.77386 | 0.77243

EURJPY                 128.157 | 127.75

EURCHF                1.10251 | 1.01134

 

For Today

• EUR: Early gains from the Sydney opening around the 1.1155 levels were quickly wiped out into the Tokyo opening with the Euro initially pushing against the 1.1180 level, the selling abated an hour into the session and although the market again moved to the 1.1180 level it never had the momentum for a strong push and the market started to slip lower and back to the 1.1155 opening, Topside offers light through the 1.1180 levels and into the 1.1200 area with offers likely to continue to the 1.1250 areas a strong push into the 1.1280 levels will likely see stronger offers appearing and a push through the 1.1320 levels seeing weak stops appearing before further strong offers from the 1.1340 levels, Downside bids possibly strongest around the 1.1120-1.1080 areas before the market opens for a deeper move and with only sentimental bids around the 1.1000 areas the market opens to possibly better bids into the 1.0940-60 areas and then the 1.0900 levels.
• GBP: Having opened around the 1.4430 levels the market initially found room to test into the Tokyo session to the 1.4455 areas before slipping a little and mirroring the movement in the Euro, the second push higher was limited and with less impetus and subsequently failed like the first and the market then started to slip lower through the balance of the session trading through the opening levels and testing the 1.4420 areas into the grey hours. Topside offers light to the 1.4500 areas and the market is likely to continue in the same frame through to the 1.4550 areas where better offers are likely to materialize, those offers are likely to continue in depth and while the offerings around the 1.4600 level maybe a little stronger weak stops and the 1.4650 areas open could see the level tested for a stronger move higher, Downside bids into the 1.4400 areas are likely to be reasonable and supportive as long as Brexit commentary is just one side or the other scaring the public on what if and so on however, news of negotiations maybe key to further moves as well as inflationary data due today with Petrol prices not exactly matching the movement in the underlying oil price possibly of import to those numbers, a push through the 1.4400 levels will see continuing bids into the 1.4350 areas before the downside opens for the market to move back into the 1.42-1.43 range from the end of last month.
• JPY: The USDJPY initially backed away from the 114.60 opening levels with the early sellers pushing the market into the 114.30’s however, the move into the Tokyo session saw the market again starting to rise as the first day of negative interest rates started, steady buying through the session saw the market testing into the waiting resistance above the 114.80 areas and with the day running out of space found it difficult to make the break through 115 and slowly drifted back to the opening levels in a dull session for USDJPY, Topside offers from the 114.80 areas are likely to continue through to the 115.20 levels however a push through those levels is likely to see the market open up for a larger move higher and with little into the 116.00 levels the market could face a little bit of a squeeze higher with the market likely to see 117.00 as a target, Downside bids light into the 114.20 levels however, those bids are likely to be deeper rather than stronger and any move lower is likely to see limited support through to the 113.20 stronger bids.
• AUD: The release of Ozzie RBA Minutes showed little change to the general tone with the RBA willing to flash the possibility of rate cuts but now more than likely looking for some follow through of inflation to justify a limited reaction to further easing, moving from the 0.7140 areas the market drifted early into the session to test the 0.7130 levels before starting a steady rise higher through into the Tokyo session and strong buying once the minutes were released however, when I say strong, I mean in relationship to how dull the Oz has been the past few weeks in general, however, as with previous moves towards the 0.7170-80 areas the rally was blunted each time it attempted the topside and eventually gave ground late into the session to drift around the 0.7150 levels to the grey hours. Topside offer from the 0.7170 levels seem to be formidable however, with impetus one assumes that the offers are likely to quickly disappear and allow the market to push through the 72 cent level and into possibly better offers from the 0.7240-60 area with offers reappearing through the 0.7280 areas. Downside bids light through the 71 cent levels and with very little inclination for anything brave until the market moves down towards the 70 cent level and beyond.

Overnight News

CNY:

China Jan new Yuan loans surge to 2.51T Yuan, well above forecasts

China seen boosting defence spending as S.China sea reforms weigh

Yuan declines most in a month as PBoC allows greater flexibility

China bad loans rise to highest in a decade as economy slows

AUD:

RBA sees low rates aiding consumer spending, and house construction

RBA low inflation may provide scope to ease if appropriate

RBA China had scope to respond to economy weaker than expected

RBA China challenge managing Yuan amid depreciation pressure

RBA says lower AUD to exert some upward pressure on inflation

JPY:

Negative interest rates are implemented today, already dubbed a failure by the markets

Aso hopes that BoJ negative rate will lead to economy expansion

PM’s advisor Hamada: Recent JPY rises are abnormal

PM’s advisor Hamada: Hedge funds likely behind the Yen rebound

PM’s advisor Hamada: Personally believes MoF should intervene in FX

GBP/EUR:

Cameron, Hollande agree firm basis for EU deal

GBP:

Brexit to put £446b of UK trade at risk: Study

NZD:

English says NZ economy is picking up

Today’s data

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

NZD       Retail Sales Ex Inflation Q/Q Q4 A 1.20% | C 1.40% | P 1.60% | R 1.50%

NZD       RBNZ 2-Year Inflation Expectation Q1 A 1.60% | P 1.90%

09:30     GBP       CPI M/M Jan C -0.70% | P 0.10%

09:30     GBP       CPI Y/Y Jan C 0.30% | P 0.20%

09:30     GBP       Core CPI Y/Y Jan C 1.30% | P 1.40%

09:30     GBP       RPI M/M Jan C -0.60% | P 0.30%

09:30     GBP       RPI Y/Y Jan C 1.40% | P 1.20%

09:30     GBP       PPI Input M/M Jan C -1.20% | P -0.80%

09:30     GBP       PPI Input Y/Y Jan C -8.60% | P -10.80%

09:30     GBP       PPI Output M/M Jan C -0.20% | P -0.20%

09:30     GBP       PPI Output Y/Y Jan C -0.90% | P -1.20%

09:30     GBP       PPI Output Core M/M Jan C 0.10% | P 0.20%

09:30     GBP       PPI Output Core Y/Y Jan C 0.00% | P 0.10%

10:00     EUR        German ZEW (Economic Sentiment) Feb C 0.1 | P 10.2

10:00     EUR        German ZEW (Current Situation) Feb C 55.0 | P 59.7

10:00     EUR        Eurozone ZEW (Economic Sentiment) Feb C 10.3 | P 22.7

13:30     CAD       Manufacturing Shipments M/M Dec C 0.90% | P 1.00%

13:30     USD       Empire State Manufacturing Feb C -10 | P -19.37

15:00     USD       NAHB Housing Market Index Feb C 60 | P 60

21:00     USD       Net Long-term TIC Flows Dec P $31.4b

Harry Hindsight              

• EUR: The Asian markets saw a steady stream of USD buying with the equity markets climbing steadily through the session, with the market making early gains before the Tokyo session pushing towards the 1.1280 levels before the selling moved in, the market traded steadily to the 1.1220 levels before finding sufficient bids to hold through to the grey hours, the move into the grey hours saw early sellers move in to the market and the market pushed down towards the 1.1200 levels before the London opening, and then continued to slide with the opening pushing to the 1.1190 areas, the move into the Eurozone trade balance saw the market continuing to hold around the 1.1200 with little reaction to those numbers however, with the US market missing for the day the move lower was gradual until the market pushed through the 1.180 areas and triggered weak stops and a quicker move to the lows just beyond the 1.1130 levels and then a quiet session from then on with the market regaining only minimally to the close.
• GBP: Cable Opened around the 1.4500 levels and initially saw light selling through the session to the 1.4490 areas before then slowly pushing ahead and into the 1.4520 areas, Tokyo were weak sellers on the opening, before moving off the 1.4510 level and trading quietly higher through the session to test above the 1.4530 levels into the grey hours, London were steady sellers through the session with the consequences of Brexit weighing on both the Euro and the Cable to some extent however, talk of haircuts in the Eurozone does have the bond market in a little bit of a panic, while Cable continued to trade lower through into the NYK session the lack of a substantial market saw the GBP dragged lower by the Euro and although the GBP did make gains against the Euro with the EURGBP testing through the day from the highs above 0.7750 and briefly through to the 0.7700 areas the market remained for the most part in the 0.7730 areas, and Cable tested into the 1.4415 areas into the close in London before trading quietly in the 1.4430-50 areas to the close.
• JPY: Opening around the 113.30 areas the market quickly pushed to the 113.70 areas during early trading in Sydney, the move into the Tokyo session saw some selling from the opening however, once the market had pushed to the 113.20’s the buyers returned with equity markets all green and the buying continued through to the grey hours peaking just above the 114.00 levels before dipping into the London opening, the move through early London saw the market holding around the 114.00 levels and only once the market moved into what would have been the NYK session did the USD buying move back into the market with USDJPY steadily rising to the 114.75 areas as the London day moved to its close with the market hen remaining above the 114.60 areas into the close.
• AUD: The Oz moved quietly through Sydney and started a steady rise through the Tokyo session before breaking through the 0.7130 levels and rising as AUDJPY buying moved into the market and a steady rise above the 0.7150 levels, the buying continued with the market initially fixated on the JPY GDP figures and then the drop in Industrial production numbers and the market pushed to the 0.7170 levels and into the grey hours, however through the remainder of the session movement was limited with very little impact with the US out on holiday and the market held through the day around the 0.7150 levels with the market drifting in the close to the 0.7140 levels and although it did on occasions attempt the topside offers through 0.7170 it was unable to find any momentum. Although I have failed to mention the CNY trade balance the numbers while on the face of it good, the underlying figures saw exports dropping and the only thing worse than the exports was the drop in imports so suggesting a strong trade balance number however, you do have to take both in effect and the dip in exports is obviously a concern for the PBoC the drop in imports is a concern for those who export to China.

Yesterday’s premiership results

CNY        Trade Balance (USD) Jan A 63.3B | C $60.90B | P $60.09B

JPY         GDP Q/Q Q4 (P) A -0.40% | C -0.30% | P 0.30%

JPY         GDP Deflator Y/Y Q4 (P) A 1.50% | C 1.60% | P 1.80%

GBP       Rightmove House Prices M/M Feb A 2.90% | P 0.50%

JPY         Industrial Production M/M Dec (F) A -1.70% | C -1.30% | P -1.40%

JPY         Tertiary Industry Index M/M Dec A -0.60% | C 0.10% | P -0.80% | R -0.90%

EUR       Eurozone Trade Balance (EUR) Dec A 21.0B | C 22.4B | P 22.7B | R 22.6B

Good Luck,

Andy

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