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USD:  The existing home sales not a major one for the dollar, unless it’s way off expectations.   There has been a steady trend of improvement in the data, with the 5mln per month level expected to be seen today, which would be highest level of monthly sales since late 2009.

Idea of the Day

The consensus from international leaders in Washington over the weekend was the need for growth. This is all well and good, but it generally (although not perfectly) goes against concerns about rising government debt and the need for austerity.   Concerns regarding the growth momentum globally have increased of late, which is one of the reasons why we’ve seen the Aussie under pressure over the past 2 weeks.

However, in Europe, the German Finance Minister Schaeulbe warned not to expect much from Europe in the coming years.   One of the reasons for this is making the reforms to spur growth, as Germany did ten years ago, take time and are that much harder to do during the bad times.   For FX, this has once again put pressure on the Aussie, which has been trapped in a broad (1.02 – 1.06 range) for nearly 9 months now.

But as we’ve said before, we’re in a different world now to “risk-on/risk-off”, so at the same time the potential for a weaker yen remains in place, with the 100 level on USDJPY close to being breached overnight.   For now, the Aussie weakness should provide transitory, whilst the yen is a bigger structural shift towards a weaker currency.

Latest FX News

JPY: The yen taking further impetus from the lack of G20 opposition to its latest policy measures. USDJPY stopped just short of the 100 level during Asia trade. This followed on from Friday’s move when PM Kuroda essentially pre-empted the sentiments coming out of Washington.

Gold:  Very slowly clawing back some of the lost ground and managing to close above the $1,400 level on Friday.   This should encourage some bulls to re-enter the market in a tentative way.

GBP: Found a decent bid in the early part of the European session on Friday, with cable pushing up to 1.5350. The big focus is with the Q1 GDP data on Thursday of this week, where expectation is for marginal increase of 0.1%.   Negative would mean UK has entered technical recession again, which would weigh on the pound.   Limited impact from Fitch downgrade from AAA.

AUD: The Aussie remains trapped in a wider range and the recent price action has further confirmed this. In the past two weeks the Aussie has moved from near the top (1.06) and is now not that far from the bottom.   The main factor driving this trend are concerns regarding global growth, together with the recent slowdown in China.