Category: Daily Look

Eurozone awaits QE announcement



It was only a matter of time before USDJPY hit the 110 level, given the broad underlying bid to the dollar, with this level achieved briefly during Asia trade. This puts it at levels last seen mid-08, but the benefits to the Japanese economy of the recent yen weakness are not that dramatic, with the underlying deterioration of the trade balance having only shown limited signs of reversal so far. Japan has moved a lot of its manufacturing production overseas, with increased energy imports also not helping. That said, the recent moves will no doubt be welcomed by the Japanese authorities, providing some support to the economy at the margins.

The main standout yesterday was the further weakness of the single currency, with core inflation developments underlining the pressures being placed on the ECB ahead of tomorrow’s policy meeting. We are likely to see some announcement of the much awaited asset-backed securities program tomorrow, with the FT today suggesting that the ECB is looking into the possibility of purchasing lower quality debt (Greek and Cypriot bank loans). This is likely to be resisted in certain quarters of the ECB. But with the pool of available assets to be purchased relatively limited (in comparison to other central banks early on in the financial crisis), this reflects the degree to which the ECB having to push boundaries in order to make the policy options available to them more effective. As such, the attractiveness of a weaker currency is pretty clear at this point in time.

Final PMI data for the Eurozone and preliminary data for the UK and the US (ISM manufacturing) are the main points of note for the data calendar today, with US ADP report also of interest ahead of US jobs data Friday.

Further reading:

Market Movers Episode #18: Questions for every trader and a preview for October’s big events

EUR/USD below 1.26 again as German manufacturing PMI falls to contraction zone

Markets await Draghi’s move

Markets await Draghi’s move

Markets were somewhat placid yesterday with equities managing to hold onto their levels following last week’s falls and FX seeing little in the way of any sharp moves. Investors look to be holding out for this Thursday where we will see not only the colour of Mario Draghi’s tie, but hope to hear what his

Q3 closing

Q3 closing

The end of Q3 nears and we move into the final stretch of 2014. The last few months can be characterized by increased volatility, in some way helped by the Scottish referendum, but more so by dollar strength which has seen the dollar index appreciate over 7% in Q3. This has been an unprecedented move taking the

Equities sell offs spiked markets

Equities sell offs spiked markets

Yesterday saw volatility spike in both equities and FX markets. The Vix index (which measures equity volatility) hit a one month high and FX volatility (as measured by the Deutsche Bank CVIX) rose sharply in the run up to the Scottish Referendum before pulling back, but yesterday spiked again to maintain levels not seen since

US dollar on the rise

US dollar on the rise

Dollar strength was the continuing theme of Wednesday. The dollar index pushed above the 85.0 level and more decisively above the peak of 84.75 seen in mid-2013, putting the dollar (on this measure) at levels last seen mid-2010 when the euro was getting hammered in the early stages of the Eurozone crisis. We are now

German IFO takes center stage

German IFO takes center stage

Eurozone PMIs yesterday did little to enthuse investors and a number of concerns over the outlook from both a macro and corporate perspective caused a big sell off in risk assets. Even the likes of the commodity currencies were affected with AUDUSD continuing its downward trend hitting a new seven month low around 0.8830 but

Temporary Aussie relief

Temporary Aussie relief

The main standout overnight is the recovery in the Aussie dollar, which has recovered back above the 0.89 level after the latest data from China brings at least some relief at the margins. The rise in the HSBC manufacturing series was marginal (from 50.2 to 50.5), but was sufficient to take away some of the

The Aussie goes down under

The Aussie goes down under

After the excitement of last week, FX markets are back to reality, which includes fresh concerns regarding the fine balancing act going on in China. Asian stocks and key commodities are starting the week softer, after comments from the Chinese Finance Minister played down the possibility of more stimulus from the government. This is the

A Big Day for Scotland

A Big Day for Scotland

Scotland has been the most talked about country in the world in recent weeks and today its residents have the chance to make one of the most important decisions in not only their history, but potentially the history of many other semi-autonomous parts of the world. Waiting in the wings are other regions across Europe

Considerable focus on the  dollar

Considerable focus on the dollar

We talked about emerging market risks yesterday and the sell-off in EM currencies seen so far this month, with the Russian rouble leading the way. This continued yesterday, with shortages of foreign currency, primarily US dollars, which prompted the Russian central bank to offer FX swaps with the aim of improving dollar liquidity. This pushed the US dollar lower