Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 109.337 | EURUSD 1.22644 | AUDUSD 0.78219 | NZDUSD 0.7266 | USDCAD 1.25676 | USDCHF 0.9435 | GBPUSD 1.338819 |

LMAX Highs and Lows 6am GMT

                                High | Low

EURUSD               1.22865 | 1.22521

USDJPY                 109.696 | 109.138

GBPUSD               1.39095 | 1.38681

USDCHF               0.94520 | 0.94230

AUDUSD              0.78321 | 0.78035

USDCAD               1.25751 | 1.25497

NZDUSD               0.72398 | 0.71811

EURCHF                1.15919 | 1.15591

EURGBP               0.88409 | 0.88236

EURJPY                 134.686 | 133.922

For today

• EUR: Another reasonably quiet range for the Euro with the market moving off the low opening to test slowly to the 1.2285 levels before slipping back to the opening again and moving into the grey hours just short of the highs, downside bids congested in the current areas and with Merkel offering a lot of concessions the market looks to be a little better bids moving into the new session, a push through to the 1.2200 levels though will likely see some stronger stops appearing through the 1.2180-70 levels and the market opening to a drop towards the 1.2120 areas, topside offers light back through the 1.2300 level and the likelihood of stops light, stronger offers possibly around the 1.2350 areas with congestive orders then running towards the 1.2400 levels.
• GBP: Cable saw a little more action with the market slowly rising through towards the 1.3900 level however, the steady rise was quickly wiped out as the market reset to the opening level before moving into the grey hours pushing through the level to make the highs. Just below 1.3920 and drifting then into the grey hours, with Brexit the focus again and UK/IRL spat likely to pick up Cable has found itself drifting from its highs with the market bids into the 1.3850 levels protecting a weak 1.3800 level the market could see strong stops if yesterday’s lows were to break, a move through the 1.3840 would likely see the move quickening and the market open to the 1.3600 handle with only sentimental levels to look for support, Topside offers light through the 1.3920 areas with some weak stops in the area before pushing through to the 1.3950-1.4000 levels and light congestion, with the US sorting out its funding for running the machine USD is likely to remain a little more robust.
• JPY: A quiet opening with the market slipping a little lower into the Tokyo session testing to the 109.10 level before bouncing back and holding tightly around the 109.35 areas, the move into the later part of the session saw a rally through to the grey hours with the market centring around the 109.65 level, the move through to the grey hours saw the market pushing above the highs and testing to the 109.80 levels, Topside offers into the 110.00 area likely to be light with stronger offers not suspected until the market tests congestion through the level and continuing into the 111.00 areas, stronger offers from that point and limited stops would suggest the market does have potential to move to the 110.50 levels before hitting any meaningful stops. Downside bids light through the 109.00 levels with stronger bids into the 108.50 level however a push through to the 108.00 is likely to be problematic, any break of that level though could see a stronger sell off appearing.
• AUD: One minor test to the downside and the 0.7805 level saw the marker and make meagre gains with the market moving lightly above the opening levels and into the light trading into the grey hours, a very quiet session for the Oz and for the moment the market seems to be focused on the downside and through the 78 cent level with the 0.7780 level likely to see stronger stops appearing and the 0.7700 level very vulnerable to a test however, stronger bids are likely to appear on a dip through the level, topside offers light through to the 79 cent areas with congestion then appearing on a test above the 0.7940 level and likely to continue to the 0.7960 area before some stops appear.

 

Overnight News

GBP:

Mervyn King former BoE governor says global debt may contain seeds of next financial crisis

NZD:

RBNZ sees avg. OCR in 1Q at 1.8%, 2Q 1.9%, 3Q 1.9%, 4Q 1.9%

NZ keeps key rate at 1.75% as seen by all surveyed economists

RBNZ policy will remain accommodative for considerable period

RBNZ maintains forecast for rates to rise in 2Q 2019

RBNZ numerous uncertainties remain, policy may need to adjust

RBNZ assumes trade weighted FX rate will ease

RBNZ sees inflation reaching 2% in 3Q 2020 vs. 2Q 2018

RBNZ FX rate has firmed since November statement

RBNZ cuts 1Q 2018 growth forecast to 0.8% from 1.2%

RBNZ NZD move in large part due to USD moves

RBNZ CPI forecast to trend upwards toward midpoint of target

RBNZ signs of emerging pressures in Global inflation

RBNZ net impact of Govt. policies revised down in near term

RBNZ NZ GDP growth expected to strengthen in 2h 2018

RBNZ Labour market conditions continue to tighten

RBNZ Tradable inflation projected to remain subdued

McDermott: Expects NZD to ease as Fed raises rates

McDermott: Drop in inflation expectations could trigger rate cut

McDermott: Can look through volatile CPI as expectations stable

CNY:

China revives QDLP outbound investment scheme in boost for foreign funds sources

GBP:

Parliament is sleep walking into a British Versailles over Europe UKT

EUR:

Merkel makes painful concessions to form new Government

Today’s data

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

NZD       RBNZ Rate Decision A 1.75% | C 1.75% | P 1.75%

JPY         Current Account (JPY) Dec A 1.48T | C 1.66T | P 1.70T

CNY        Trade Balance (USD) Jan A 20.3B | C 54.9B | P 54.7B

CNY        Trade Balance (CNY) Jan A 136B | C 325B | P 362B

GBP       RICS House Price Balance Jan A 8.00% | C 5.00% | P 8.00%

AUD       NAB Business Confidence Q4 A 6 | P 7 | R 8

JPY         Eco Watchers Survey Current Jan A 49.9 | C 53.6 | P 53.9

07:00     EUR        German Trade Balance Dec C 21.0B | 23.7B

09:00     EUR        ECB Economic Bulletin

12:00     GBP       BoE Rate Decision C 0.50% | P 0.50%

12:00     GBP       BoE Asset Purchase Target Feb C 435B | P 435B

12:00     GBP       MPC Official Bank Rate Votes C 0–0—9 | P 0–0–9

12:00     GBP       MPC Asset Purchase Facility Votes C 0–0—9 | P 0–0–9

12:00     GBP       BoE Inflation Report

13:15     CAD       Housing Starts Jan C 211K | P 218K

13:30     CAD       New Housing Price Index M/M Dec C 0.20% | P 0.10%

13:30     USD       Initial Jobless Claims (3 FEB) C 236K | P 230K

15:30     USD       Natural Gas Storage P -99B

23:50     JPY         Japan Money Stock M2+CD Y/Y Jan C 3.60% | P 3.60%

 

Harry Hindsight

• EUR: A reasonably quiet range through the Asian session with a general trend higher through to the grey hours, opening around the 1.2375 areas the market gradually made a move through into the grey hours pushing the 1.2400 levels in weak buying, the move into the London session saw the market drop off from the highs dipping through the opening and dipping to the 1.2365 level after a poor IP number out of Germany, the market continued to slip lower through the session dipping through to the NYK session holding the 1.2335 level, the market eventually broke through the level deeper into the NYK period slipping quickly over the next 3 hours through to the 1.2250 levels before finding some respite and bouncing weakly off the levels to test towards the 1.2280 before drifting back into the close.
• GBP: With recovering equity markets and comments from Mnuchin on a strong USD policy the market for the USD found strength across the board, with Asia doing very little in Cable through the session the market unable to push beyond the 1.3970 levels but remaining above the 1.3950 level through to the grey hours, Early London rushed the market to the 1.3990 levels however, the market dropped back on the official opening to test back quickly through to the 1.3925 levels, as the market ran deeper into London so the selling deepened with the Cable slipping a second time to the 13870 levels before finding some support and reversing some of the losses through to the NYK session, the Cable managed to press to the 1.3935 levels again but while the rally took several hours the next drop was quicker and this time pressing the sentimental 1.3850 area before rising slowly to the close.
• JPY: Given the movement in other pairs USDJPY had a limited range but a little choppy, opening around the 109.60 level the market made early highs through the 109.70 level before dropping back quickly into the Tokyo session testing the 109.40 levels and a slow move the first couple of hours, the movement when it came was a slow steady decline in a tight channel through to the 108.95 levels before holding quietly in early London, the move towards the NYK session saw the market slowly pushing higher to push back to the 109.35 levels and only as the market pushed for the close did it awaken again bouncing between the 109.25-70 levels on several occasions through to finishing on the low end of the range.
• AUD: opening above the 79 cent level the Oz was always under pressure with NZD rate decision and commentary not helping the matters, the market held in early trading around the 79 cent level however, the further into the Tokyo session the more selling appeared with the market moving through to the grey hours around the 0.7865 areas, London were light sellers however the move through to the London close saw the market dipping at a quicker pace to trade around the 0.7820 level with minor pushes below the level.

Yesterday’s premiership results

NZD       Employment Change Q/Q Q4 A 0.50% | C 0.40% | P 2.20%

NZD       Unemployment Rate Q4 A 4.50% | C 4.70% | P 4.60%

JPY         Labour Cash Earnings Y/Y Dec A 0.70% | C 0.60% | P 0.90%

JPY         Leading Index CI Dec (P) A 107.9 | C 108.1 | P 108.3

EUR        German Industrial Production M/M Dec A -0.60% | C -0.50% | P 3.40% | R 3.10%

CHF        Foreign Currency Reserves Jan A 731B | P 744B

CAD       Building Permits M/M Dec A 4.80% | C 2.00% | P -7.70%

USD       Crude Oil Inventories A 1.9M | C 3.2M | P 6.8M

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