Data/Event Risks
- GBP: Modest interest with construction PMI data but notable that the stronger manufacturing PMI data yesterday barely touched sterling, suggesting a lower sensitivity to data at this point in time.
- EUR: The meeting of Finance Ministers in Brussels today presents some risks, but the major decisions on Greece have already been made so volatility risk should be lower.
- AUD: GDP data released Wednesday, with today’s RBA move (25bp cut) probably cementing expectations of reasonable number around the 0.6% QoQ expansion seen in Q2.
- CAD: Bank of Canada seen keeping rates firmly on hold at 1%, but worth eyeing the statement given the weaker tone to the economy of late. CAD proving more vulnerable to weakening towards 1.00 on USD/CAD should BoC soften the hawkish tone that has prevailed for most of the last year.
Idea of the Day
The euro a safe haven? There have been periods when it has displayed some elements of this before (especially via central bank diversification last year), but could we be entering such a period again? The reason for asking is that the dollar and yen are having their problems. Although at near-term risk of short-covering, the yen is looking more fragile into the general election this month and the dollar is struggling to trade as a safe-haven – the source of the uncertainty for both is of their own making. This leaves the single currency the next available and most liquid major currency on the block. It may not be pretty, but quite often FX is an ugly contest and a race to the bottom.
Latest FX News
- USD: Stocks proving to be soft into the NY close, down around 0.5%, but notable that the dollar was reluctant to show any perkiness as would normally be expected. Fiscal cliff seems to be giving it more of a headache.
- EUR: Holding steady overnight. Eurozone finance ministers meet today and Greek bond buy-back continues, the success of which is key to ensuring Greece gets its next aid tranche.
- JPY: Relatively steady overnight, but still a modest downward bias on USD/JPY owing to the extent of short JPY positions which some are deciding to cover; the upward momentum has waned.
- AUD: The RBA cut rates by 0.25% to 3.00% as broadly expected. The Aussie was slightly firmer on the news, reflecting some hopes of bigger cut. Around half of initial bounce unwound.
- GBP: BRC retail sales data showed 0.4% YoY on line for like retail sales. Up from -0.1% Oct number, but weaker than expected. Eyes firmly on level of Christmas demand this month.
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