Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 112.611 | EURUSD 1.07132 | AUDUSD 0.75671 | NZDUSD 0.71937 | USDCAD 1.30417 | USDCHF 1.00163 | GBPUSD 1.24148 |

LMAX Highs and Lows 6am GMT

                                High | Low

EURUSD               1.07170 | 1.06812

USDJPY                 113.378 | 112.55

GBPUSD               1.24176 | 1.23270

USDCHF               1.00432 | 1.00126

AUDUSD              0.75648 | 0.75396

USDCAD               1.30766 | 1.3042

NZDUSD               0.72142 | 0.71892

EURCHF                1.07306 | 1.07239

EURGBP               0.86722 | 0.86305

EURJPY                 121.109 | 120.653

For Today

• EUR: A quiet session with some minor adjustments against the GBP as the Brexit show rolls on, the market opened around the highs for the day dipping back through the 1.0700 levels from 1.0710 areas and then holding the 1.0690 area and unable to push back through the 1.0700, Topside offers through the 1.0720 areas and possible stops making an appearance a push through is likely to see weaker offers into the 1.0740-60 areas with light congestion likely to follow through to the stronger 1.0780-1.0800 areas. Downside bids light through to the 1.0650 areas and some congestion through to the 1.0600 levels, with congestion likely to continue with bids building as the market moves through the sentimental levels, with particular strength likely through the 1.0550 areas.
• GBP: A large correction after the UK PM’s speech saw the Cable moving into the new session on its highs around the 1.2410 areas and the market then drifted through the session as light profit taking and limited sellers moved into the market, the gradual selling took the market through the 1.2350 levels and the market has remained in the 1.2330-50 areas into the grey hours. With several numbers for the day of import the least of which is weekly earnings and employment then followed by US numbers, Topside offers into the 1.2450 areas likely to slow any push however a push to the 1.2500 areas will likely see stronger offers appearing with a break through hitting strong stops and the market opening for a test higher through to the 1.2650-1.2700 areas and possibly stronger stops, Downside bids light at best having seen the market make significant lows and highs so far this week, a push through the 1.2300 level is likely to see weak stops appearing and the market vulnerable to the 1.2200 areas with better bids then likely to appear from that period onwards.
• JPY: A slow recovery for the USDJPY as the market adjusts to the new Cable levels, as the USD recovered from the opening USDJPY moved up from just below the 112.60 areas pushing into the Tokyo session testing the 113.00 areas and then drifting through the opening to test back towards those lows, once the Tokyo fix was over with the market again started to rise again and quickly pushed to hold around the 113.00 areas for much of the session before heading towards the grey hours and pushing a little quicker towards the 113.40 levels. Topside offers light through the 113.60 areas but present with stronger offers likely to move into the market on a move to the 114.00 with some limited congestion through the figure and weak stops possibly around the 114.50 areas appearing. Downside bids light back through the 113.00 areas with stronger bids moving in towards yesterday’s lows and the 112.50 areas, limited stops on the move through are likely to be soaked up by bids into the 112.00 areas and better stops on a move through the 111.80 areas for a test to the 111.00-20 areas.
• AUD: Slightly stronger USD saw the Oz drift back from the opening 0.7565 opening areas, the market held through the session basing along the 0.7540 areas and rising slightly above the 0.7550 all the way through to the grey hours. Downside bids into the 0.7530 areas with possible weak stops on a drop through the level to quickly test a weak 75 cent level with the best bids likely to begin appearing into the 0.7460 areas, light congestion on a move through the levels below there with some light stops mixed in, and better bids likely into 74 cents. Topside offers around the current highs with congestion light through to the 76 cent levels once the 0.7570 is cleared with weak stops through the 0.7620 areas and then steady offers from then on.

Overnight News

USD:

Fed’s Williams Backs Gradual Hikes; Sees Risks Roughly Balanced

Williams Sees Fiscal Stimulus Spurring Fed Balance Sheet Debate

Fed’s Williams Says Risks to Outlook Include China, Europe

Trump Says Doesn’t Like Tweeting But Useful to ‘Counteract’: Fox

USD/CNY:

PBOC Adviser Fan Sees Stronger Yuan Against Dollar: China Daily

CNY:

PBOC Adds Most Funds on Net Basis in Data Going Back to 2004

China Home Price Growth Slows as Further Property Curbs Imposed

S&P’s Lee Expects More Local Bond Defaults in China This Year

CNY/USD:

China Vice Premier, U.S.’s Lew Discuss Economic Ties: Xinhua

AUD:

Australia Jan. Consumer Confidence Rises 0.1% M/m to 97.4

JPY/GBP:

Japan: Will Keep Pushing U.K. to Minimize Brexit Impact on Firms

Japan to Watch Brexit Movements Following May’s Speech

JPY:

BOJ Purchase of Over 25-Year Bonds Draws Most Demand Since Aug.

Japan Seen Missing Fiscal 2018 Debt-Reduction Target: Nikkei

Japan May Let Emperor Akihito Step Down in Dec. 2018, Kyodo Says

Today’s data

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

AUD       Westpac Consumer Confidence Jan A 0.10% | P -3.90%

07:00     EUR        German CPI M/M Dec (F) C 0.70% | P 0.70%

07:00     EUR        German CPI Y/Y Dec (F) C 1.70% | P 1.70%

09:30     GBP       Jobless Claims Change Dec C 5.0K | P 2.4K

09:30     GBP       Claimant Count Rate Dec C 2.30% | P 2.30%

09:30     GBP       Average Weekly Earnings 3M/Y Nov C 2.60% | P 2.50%

09:30     GBP       ILO Unemployment Rate 3M Nov C 4.80% | P 4.80%

10:00     EUR        Eurozone CPI M/M Dec (F) C 0.50% | P -0.10%

10:00     EUR        Eurozone CPI Y/Y Dec (F) C 1.10% | P 1.10%

10:00     EUR        Eurozone CPI – Core Y/Y Dec (F) C 0.90% | P 0.90%

13:30     USD       CPI M/M Dec C 0.30% | P 0.20%

13:30     USD       CPI Y/Y Dec C 2.10% | P 1.70%

13:30     USD       CPI Core Y/Y Dec C 2.20% | P 2.10%

13:30     USD       CPI Core M/M Dec C 0.20% | P 0.20%

14:15     USD       Industrial Production Dec C 0.60% | P -0.40%

14:15     USD       Capacity Utilization Dec C 75.40% | P 75.00%

15:00     USD       NAHB Housing Market Index Jan C 69 | P 70

15:00     CAD       BoC Rate Decision C 0.50% | P 0.50%

19:00     USD       Fed’s Beige Book

21:00     USD       Net Long-term TIC Flows Nov C 21.3B | P 9.4B

Harry Hindsight

• EUR: Opening around the 1.0600 levels the Euro initially struggled through into the Tokyo session before starting a steady rally through to the 1.0650 levels into the grey hours, comments from Trump in an interview from Friday upsetting a few and starting the decline in the USD as he starts to talk down the strong USD policies of old, the move into the London session saw the market test towards the 1.0680 before holding in a 1.0660-80 area into May’s UK Brexit speech, once the speech was underway the Euro struggled to maintain its gains as the market pushed through the 1.0700 levels, the EURGBP started to test deeper through the 0.8800 areas having based along the figure for the Asian session, the beginning of the speech saw the market for the EURGBP drop quickly back initially to the 0.8720 areas and then continuing through to 0.8680 areas, Euro’s then struggled in an ever decreasing range around the 1.0700-10 levels and unable to push towards the stops just above.
• GBP: So the question is did they plan the PM May’s for today because they already knew the market would be supported by increasing inflation, not that it mattered as the market was possibly relieved that there was some semblance of a plan one which suggests that the UK will base its negotiations off the worst case scenario and anything else will be a bonus, with this GBP found plenty of support through the day, after initially dipping towards the 1.2000 level and pushing through into the Tokyo session moving towards the 1.2050 levels, through into the grey hours saw the market testing through the 1.2100 levels triggering some weak stops pushing to the 1.2140 levels. Strong inflationary numbers that would suggest the lowest ever interest rates are close to ending, this triggered another steady rise to test towards the 1.2200 areas and into the speech itself, of course there was a lot said with cautious warnings to the Federalists that punishing the UK would hurt both sides, Cable quickly moved higher over the next hour or so pushing through the 1.2300 levels and then slowly rising over the final big figure as the market moved into the NYK session to test to the 1.2400 areas, late in NYK the market pushed through the level and then held the areas to the close.
• JPY: USDJPY dipped to below the 114.00 levels from the opening in Tokyo, the market bounced a little from that low however, the commentary from Trump seemed to put paid to the topside and the USD started a long steady slide through the session moving into the grey hours trading the 113.40 levels and held through to the London session, the selling continued through the early part of the London session and the UK’s PM speech saw the JPY weaken a little as GBPJPY moved higher, USDJPY topped around the 113.60 areas into the NYK session before slipping back and then trading down through the 112.80 areas touching the 112.60 areas into the close.
• AUD: Oz benefitted from a weaker USD after the Trump comments, with the market opening around the 0.7480 areas and drifting a little lower before starting a steady climb higher through to the 0.7510 areas and into the grey hours, early London were quick buyers and pushed the market into the congestive offers around the 0.7550 levels and the market struggled from there on around the 0.7540 areas deep into the NYK session before clearing the level towards the close.

Yesterday’s premiership results

AUD       Home Loans Nov A 0.90% | C 0.00% | P -0.80% | R -0.60%

JPY         Industrial Production M/M Nov (F) A 1.50% | C 1.50% | P 1.50%

GBP       CPI M/M Dec A 0.50% | C 0.30% | P 0.20%

GBP       CPI Y/Y Dec A 1.60% | C 1.40% | P 1.20%

GBP       RPI M/M Dec A 0.60% | C 0.40% | P 0.30%

GBP       RPI Y/Y Dec A 2.50% | C 2.30% | P 2.20%

GBP       PPI Input M/M Dec A 1.80% | C 2.40% | P -1.10% | R -0.60%

GBP       PPI Input Y/Y Dec A 15.80% | C 15.50% | P 12.90% | R 13.30%

GBP       PPI Output M/M Dec A 0.10% | C 0.40% | P 0.00% | R 0.10%

GBP       PPI Output Y/Y Dec A 2.70% | C 2.90% | P 2.30% | R 2.40%

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

GBP       PPI Output Core Y/Y Dec A 2.10% | C 2.20% | P 2.20% | R 2.30%

GBP       House Price Index Y/Y Nov A 6.70% | C 6.10% | P 6.90%

EUR        German ZEW (Economic Sentiment) Jan A 16.6 | C 18.4 | P 13.8

EUR        Eurozone ZEW Survey (Economic Sentiment) Jan A 23.2 | C 24.2 | P 18.1

EUR        German ZEW (Current Situation) Jan A 77.3 | C 65 | P 63.5

USD       Empire State Manufacturing Jan A 6.5 | C 8.5 | P 9

Good Luck,

Andy

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