Data/Event Risks
- USD: Just the weekly mortgage application data on today and you know things are desperate when this is the only piece of excitement on offer. But markets have been exciting enough of late without having to worry about data.
- GBP: Other than Halifax house prices, nothing of note ahead of the Bank of England interest rate decision and industrial production data tomorrow.
- EUR: Germany factor orders is not the kind of data release that is going to set markets alight, so more a question of waiting for the ECB decision tomorrow and more importantly the press conference afterwards.
- AUD: The labour market data released early Thursday will be a key focus after the dovish RBA statement seen earlier this week. Unemployment is seen nudging higher to 5.5% (from 5.4%).
Idea of the Day
The phrase “currency wars” has been thrown around a little more freely of late but it was left to French President Hollande to throw in the hand grenade yesterday, stating that “We can’t let the euro fluctuate according to the mood of the market”. We don’t need to fear a regime of fixed exchange rates around the corner, but the comments are in some way indicative of the tension surrounding currency moves at present, not to mention the bad judgement of politicians in thinking that they have a better alternative which does not involve the mood of the elected (and unelected) elite. Still, when politicians start blaming markets, then you know things are getting desperate. Be prepared for more of this type of talk over the coming month, but the single currency should be able to shrug it off with ease, so any moves should prove transitory overall.
More: Bad news for EUR might be good news later on
Latest FX News
- JPY: Another shocker for the yen yesterday, with significant losses against all major currencies, especially the all-powerful euro. BoJ leader Shirakawa pledged to step-down a whole 3 weeks earlier that the official end date of his term in April. This was one reason for the weaker yen, with the path towards a more dovish successor made that much easier and quicker than before.
- EUR: As expected, the buyers emerged in size into the weakness witnessed during yesterday’s Asian trading session, propelling the single currency up almost one and a half big figures to 1.36 by late afternoon. Against the suspect Japanese yen the euro was again all-conquering, surging from an early low of 124 to above 127.50. It has been an extraordinary move in this cross – an incredible 35% appreciation since late July!
- GBP: Back to losing ways yesterday for sterling, with cable snapping through 1.57 as the euro surged and EUR/GBP testing 0.87 from an earlier low of 0.8555. No need to fight the tape on the pound – the sellers are still in control.
- AUD: Continued to drift lower overnight to a low of 1.0334, a level we have not seen for three months. December retail sales were soft, and so when placed alongside the RBA’s apparent dovishness, it was little wonder that the currency suffered.
Further reading: EUR: Could be Slightly Oversold on Political Uncertainties
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