Data/Event Risks
- USD: A mixture of national housing and regional activity indices this week, but not much else. Of greater interest will be how President Obama responds to the Republican’s offer to extend the debt ceiling for a further three months.
- GBP: Critical period for sterling immediately ahead in terms of event risk, with the latest monthly budget figures for December out at 9.30 followed by the CBI Trends survey at 11.00. Tomorrow the ONS release the latest employment figures – jobs growth has been remarkably decent given the languishing economy. On Friday, the initial estimate of Q4 GDP may well show a fall in output of as much as 0.5%, which would do the pound no favours. Eventually, David Cameron will deliver his much-awaited speech on Europe – his policy is an unambiguous negative for the currency.
- EUR: Not much to get excited about today.German and EC ZEW unlikely to move the dial when they come out at 10.00. Thursday looms as more important, with various flash estimates of national manufacturing and services PMI. See how to trade the ZEW report with EUR/USD.
Idea of the Day
Despite the lack of a specific time limit from the BOJ on achieving the 2% inflation target, and the delay in open-ended asset purchases until early 2014, we have actually witnessed less profit-taking overnight than might have been expected. USD/JPY traded at 89.60 prior to the announcement, before dropping back through 89 briefly (now 89.20). EUR/JPY likewise was around 119.60 ahead of the decision, before falling back under 119, now 119.10. The lack of real short-covering may well suggest that there is still a deep well of additional selling to be done. Certainly Japanese politicians would welcome it, as would the BOJ, because it will help to achieve their inflation target more quickly.
Latest FX News
EUR: Completely becalmed yesterday, with trading unusually confined to a very narrow range. Euro-repatriation remains a key theme in support of a higher euro, despite the unsatisfactory outcome to the latest Ecofin meeting. Drifted north overnight ahead of the BOJ meeting to a high of 1.3371.
GBP: Still looks soft, and faces a tough examination in coming days. Hard to fight the tape at present, especially as money appears to be flowing back towards Europe. The Conservative’s stance on Europe is also rattling a few cages amidst concerns that Britain is accidentally committing financial suicide. That said, cable again failed to penetrate the November low, so there is obviously some real support underneath.
CHF: Swiss shorts rushed to the side-lines on Friday, and for some of yesterday, with EUR/CHF falling below 1.24. After BOJ, the cross spiked to 1.2460, now 1.2440. CHF bears still appear to be in the ascendancy.
AUD:Has faded from view over recent weeks, with the concentration very much on the other majors. CPI out tonight – a low print will encourage the idea that the RBA can do more in terms of rate cuts. There was some AUD/JPY buying ahead of the BOJ, which pushed the Aussie up through 1.0550.
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