Daily FX Market Commentary

Andy Harrison

Good Morning,

LMAX Close

USDJPY 111.889 | EURUSD 1.13078 | AUDUSD 0.70844 | NZDUSD 0.67924 | USDCAD 1.33505 | USDCHF 1.00428 | GBPUSD 1.31781 |

LMAX highs and Lows 06.00 GMT

                                Highs | Lows

EURUSD               1.13084 | 1.12899

USDJPY                 111.917 | 111.725

GBPUSD               1.31794 | 1.31241

USDCHF               1.00550 | 1.00349

AUDUSD              0.70887 | 0.70291

USDCAD               1.33738 | 1.33494

NZDUSD               0.68009 | 0.67528

EURCHF                1.13585 | 1.13479

EURGBP               0.86021 | 0.85802

EURJPY                 126.525 | 126.191

For Today

• GBP: The confirmation that the main Brexit negotiators were on their way back to the UK after failure to clinch anything saw the Cable drop back just after the opening dipping from the 1.3175 area through the 1.3150 area before holding quietly through into the Tokyo session, the push through the 1.3150 level for the second time saw another light run to the downside and the market pushing the 1.3125 level before pushing lightly back to the 1.3140 and drifting to the grey hours, Congestion to the downside around the 1.3100 level with possible weak stops on a push through the level is likely to see congestion increasing on any dip to the 1.3050 level however, the any push here could see the downside opening to stronger selling through to the 1.2900 where the market is likely to be stronger, topside offers light through to the 1.3100 level with congestion likely on any push through,
• JPY: Opening around the 111.85 areas and testing in a limited fashion to the 111.90 level before drifting through into the Tokyo, Tokyo fix saw some selling through to the 111.75 areas and basing along the level through to the grey hours, topside offers into the 112.20 areas with light congestion likely with limited congestion continuing higher and that stronger congestion then continuing through the 112.50 areas. Downside bids light back through the 111.00 levels with stronger congestion into the 110.80 levels and likely to continue deep into the 110.40 before weakness appears, weak stops on a move through and limited congestion into the 110.00 level.
• AUD: Rising from the opening through to the 0.7090 levels before moving into the Tokyo session and a succession of comments from Lowe saw the market drop quickly through to the 0.7050 areas holding for a short period before dipping for a second time and testing through to the 0.7030 levels and holding quietly through to the grey hours, topside offers limited through to the 0.7120 level and some congestive come sentimental offers in the area before weak offers through to the 0.7150 level and stronger congestion likely to start appearing on any move through to the 0.7200 levels, downside bids light through to the 0.7020 area before stronger congestion starts to appear and continuing through to the 70 cents levels. A push through the 70 cent level will likely see strong congregation of stops appearing and the market relying on sentimental values to a greater extent with 0.6950 and 69 cents possibly holding strong bids to hold the market for the time being.
• EUR; Euro’s drifted from the opening just above the 1.1305 level ad falling slowly back to the 1.1300 area and then in Mid-Tokyo breaking through to the 1.1290 levels and the low for the session, holding through to the grey hours with very little movement. Topside offers building into the 1.1380-1.1420 areas with a little weakness on a push through that high with stronger offers then appearing into the 1.1450 areas, downside bids  into the 1.1280 level weak stops likely on a test through the level before stronger bids start to reappear on a push to the 1.1250 level, possible stronger stops likely on any push through the 111.80 level with possible stronger bids into that level,

Overnight News

JPY:

Japan investment real estate stocks getting hit NHK

BoJ’s Harada: Underlying weakness in inflation could weigh on inflation expectations, delay acceleration of inflation

Harada: BoJ must strengthen monetary easing without hesitation if economy worsens, makes it hard to hit price goal

Harada: Raising rates may not necessarily steepen yield curve

Harada: Ending monetary easing would push down prices worsen economy

Harada: This year’s scheduled sales tax hike could hurt economy, push down prices by weakening demand

Harada: Expected fall in cell phone charges could weigh on inflation, delay achievement of BoJ’s price goal

Harada: Opposed BoJ’s new forward guidance adopted last July due to view guidance must be data dependent, not calendar dependent

Harada: My view was that BoJ’s forward guidance must have phrase committing to keep rates at very low levels until inflation shows stronger than expected moves

Harada: Having data dependent forward guidance would show markets BoJ will act flexibly to changes in economy

Harada: BoJ would need to ease more if economy worsens more than expected, reduce degree of monetary support if economy improves

Harada: If China’s import volume continues to fall, that could cloud outlook for Japan’s output, exports

Harada: Risks to Japan’s economy heightening as consumption remains weak despite rising household income

EUR/CNY:

Italy set to join China’s controversial Belt and Road initiative FTI

GBP/EUR:

Brexit warning: UK may be forced into customs union as EU official says talks going badly Daily Express

Brexit talks breakdown: Geoffrey Cox and Barclay leave Brussel’s Daily Express

GBP:

Trio of improvised explosive devices sent to London transport hubs and echoes of the IRA SYH

Ex-MI6 Chief says no deal Brexit is far better than PM May’s offering Telegraph

PM May’s gamble has backfired Her MP’s would sooner extend Brexit than accept her awful deal – Telegraph

AUD:

RBA Gov Lowe: Has flexibility to adjust monetary policy in either direction

Lowe: Plausible scenarios where rates go up and where rates go down

Lowe: At moment, the probabilities appear reasonably evenly balanced

Lowe: Labour market is key issue, recent data have been encouraging

Lowe: Other economic indicators paint a softer picture

Lowe GDP growth in second half of 2018 was clearly less than in first half

Lowe: Growing tension between strong labour market data and softer GDP data

Lowe: Adjustment in housing market is manageable for overall economy

Lowe: Less than 5% of indebted owner occupier households have negative equity

Lowe: Liaison showed some lenders became more cautious last year

Lowe: Credit conditions tightened more than was probably required

Lowe: Important that banks are prepared to take credit risk

Lowe: Tightening in credit supply contributed to slowdown in credit growth

Lowe: Main story is one of reduced demand for credit, rather than reduced supply

Lowe: Wealth effects influencing consumption, but mainly through income expectations

Lowe: This means developments in Labour market particularly important

Online retail sales index contracted -0.5% in January – NAB

Today’s Data

Actual A | Consensus C | Previous P | Revised R | all timings GMT/UTC

AUD       GDP Q/Q Q4 A 0.20% | C 0.50% | P 0.30%

13:15     USD       ADP Employment Change Feb C 190K | P 213K

13:30     CAD       International Merchandise Trade (CAD) Dec C -1.70B | P -2.06B

13:30     CAD       Labour Productivity Q/Q Q4 C 0.20% | P 0.30%

13:30     USD       Trade Balance (USD) Dec C -57.8B | P -49.3B

15:00     CAD       BoC Rate Decision C 1.75% | P 1.75%

15:00     CAD       Ivey PMI Feb P 54.7

15:30     USD       Crude Oil Inventories P -8.6M

19:00     USD       Federal Reserve Beige Book

Harry Hindsight

• GBP: A slow drift through the early part of the Asia session falling back from the opening around the 1.3175 levels and drifting to the 1.3165 area, the move too the final hours before the grey hours the fall increased and dipped through to the 1.3150 level to hold through to the London opening, early buyers saw the market pushing slowly up from the 1.3185 levels for a brief test to the 1.3200 areas before running out of steam, the market dipped from the strong run on the back of the Services PMI and dipped back through to the 1.3150 levels bouncing for the move into the NYK session, early NYK were strong sellers with Brexit talks failing the market pushed through to the 1.3100 level triggering minor stops on the move through the 1.3150 levels dipping only lightly through the 1.3100 areas and started a slow steady rise through to the 1.3150 level again into the London close and the market pushed steadily up to the opening levels again before holding quietly to the close.
• JPY: A slow rise through the Asian session pushing from the 111.70 level opening and testing initially through the 111.90 levels before settling back a little, the move to the grey hours saw the range cantered around the 111.90 areas and continuing through into the London session, London struggled quietly with the level before moving into the NYK session slipping slowly through to the 111.80 level, US services numbers initially weakened the market a little before the ISM number helped the market quickly through the 112.00 areas and spiking through to the 112.15 area before dropping quickly back and then drifting through to base along the 111.80 level into the close.
• AUD: The Oz did very little through the day with a minor variation around the RBA announcement slipping a little from the opening and spiking in Tokyo too the 0.7096 level before dropping through to the 0.7070 areas and forming the base for the bulk of the day, with the range tightly around the 0.7080 levels, US numbers saw the market low for the day and a light test through the 0.7060 level before rising slowly back towards the opening levels for the close.
• EUR; Topside saw the market held below the opening 1.1340 areas and holding through to mid-Tokyo around the 1.1335 level before dipping through to the 1.1330 level for the move into the grey hours, early sellers saw the market testing the 1.1320 areas and then a slightly larger range through to the NYK session ranging from the 1.1320 level through to just below the 1.1340 areas and continuing through US numbers and the Euro dropping quickly through to the 1.1300 area testing lightly to the 1.1290 area and only recovering lightly through to the 1.1310 level for the move to the close on a quiet day for the Euro.

Yesterday’s Premiership results

AUD       AiG Performance of Service Index Feb A 44.5 | P 44.3

NZD       ANZ Commodity Price Feb A 2.80% | P 2.10% | R 2.00%

GBP       BRC Retail Sales Monitor Y/Y Feb A -0.10% | C 0.10% | P 1.80%

AUD       Current Account (AUD) Q4 A -7.2B | C -9.1B | P -10.7B | R -10.8B

CNY        Caixin China PMI Services Feb A 51.1 | C 53.5 | P 53.6

AUD       RBA Rate Decision A 1.50% | C 1.50% | P 1.50%

CHF        CPI M/M Feb A 0.40% | C 0.40% | P -0.30%

CHF        CPI Y/Y Feb A 0.60% | C 0.60% | P 0.60%

EUR        Italy Services PMI Feb A 50.4 | C 49.5 | P 49.7

EUR        France Services PMI Feb (F) A 50.2 | C 49.8 | P 49.8

EUR        Germany Services PMI Feb (F) A 55.3 | C 55.1 | P 55.1

EUR        Eurozone Services PMI Feb (F) A 52.8 | C 52.3 | P 52.3

GBP       Services PMI Feb A 51.3 | C 50 | P 50.1

EUR        Eurozone Retail Sales M/M Jan A 1.30% | C 1.30% | P -1.60% | R -1.40%

USD       Services PMI Feb (F) A 56 | C 56.2 | P 56.2

USD       ISM Non-Manufacturing/Services Composite Feb A 59.7 | C 57.3 | P 56.7

USD       New Home Sales Dec A 621K | C 590K | P 657K | R 599K

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