- U.K. Jobless Claims Free Falls Most Since 1997, GBPUSD Rallies Wed, 17 Mar 2010 11:07 GMT
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- Mar, 17 British Pound Takes Center Stage Ahead of Bank of England Minutes, Jobs Report
- Mar, 16 Euro Volatility Likely on German ZEW Survey, EU FinMin Summit Outcome
- Mar, 15 US Dollar Rises on Safety Demand as China’s PM Wen Warns of “Double Dip”
- Mar, 12 Japanese Yen Sold on Currency Intervention Threat, BOJ Easing Rumor
- Mar, 11 Swiss Franc May Turn Volatile Against Euro as SNB Announces Monetary Policy
- Mar, 10 British Pound Little Changed in Asia, Industrial Production on Tap Ahead
- Mar, 09 Pound Declines on Soft Retail Sales, House Prices Data and Bank Downgrade Scare
- Mar, 08 Euro May Rise Against US Dollar Amid Fading Greece Concerns, Risk Recovery
- Mar, 05 Currency Markets Mark Time in Asian Trade Ahead of US Jobs Report
- Mar, 04 Euro Looks to ECB Take on Greece, Pound Vulnerable on Dovish BOE
- Mar, 03 Euro, Pound Gain as Greek Spending Cut Rumors Stoke Risky Assets
- Mar, 02 Currency Markets Not Impressed as Australia Raises Interest Rates to 4%
- Mar, 01 Euro Surges to Highest in Seven Weeks Against Pound on Greek Bailout Chatter
- Feb, 26 British Pound Pulls Back as Traders Brace for the Fourth-Quarter GDP Report
- Feb, 25 Dollar, Yen Surge as S&P Sinks Risky Assets with Greek Downgrade Threat
- Feb, 24 US Dollar Declines Against Major Currencies Ahead of Bernanke Testimony
- Feb, 23 Euro May Gain Against US Dollar on German IFO Survey, Risk Appetite
- Feb, 22 Euro, British Pound Rise as Risk Appetite Firms to Start Trading Week
- Feb, 19 Dollar to Extend Gains Against Euro and Pound on Weak Data, Risk Aversion
- Feb, 18 US Dollar Extends Gains on Safety Demand as Stocks Retreat in Asian Trade
The currency markets are likely to look past German inflation figures given their limited implications for near-term ECB monetary policy, with risk aversion taking over as the primary driver of price action amid fears of fading US and Chinese stimulus measures.
Key Overnight Developments
• Australian Dollar Rises as Economic Data Boosts Rate Hike Outlook
• Japan’s Trade Surplus Swells as Exports See First Gain in 15 Months
Critical Levels
The Euro was little changed in Asian trade, oscillating in a well-defined 50-pip band below 1.41. The British Pound followed suit, trading in a choppy range above 1.61. We remain short EURUSD at 1.4881.
Asia Session Highlights
Japan’s Merchandise Trade Balance surplus expanded to 545.3 billion yen in December, up from a revised 371.3 billion in the previous month as exports grew at an annual pace of 12.1%, the first gain in 15 months and the largest one since October 2007. Cross-border sales have steadily improved since bottoming at a decade low in January 2009 as the world’s governments spent close to $2 trillion on fiscal stimulus, boosting overseas demand for Japanese goods. However, it is important to consider that year-on-year comparisons were invariably going to turn sharply positive assuming anything less severe than continued freefall in exports when sized up against the record-setting collapse in late 2008. Indeed, looking past the headline figure reveals that shipments have actually recovered less than half of the drop from the peak in March 2008.
The Australian Dollar advanced as a set of encouraging economic data boosted expectations that firming recovery will see the central bank raise interest rates for the fourth consecutive time next week. Australia’s Consumer Price Index printed slightly higher than economists expected, with prices adding 0.5% to push the annual inflation rate to 2.1% in the fourth quarter. Food and recreation prices led the metric higher, adding 1.4% and 1.5% respectively from the previous quarter. Separately, a Leading Index of indicators aimed at forecasting the trajectory of the economy over the coming months from Westpac Banking Corp rose at the fastest annual rate in two years. A Credit Suisse gauge of priced-in rate hike expectations now shows traders see a 73% chance of a 25 basis point increase in benchmark borrowing costs at the next policy meeting versus 67% yesterday.
Euro Session: What to Expect
The preliminary estimate of Germany’s Consumer Price Index headlines the economic calendar in European hours with expectations calling for the annual pace of inflation to rise to 1.0% in January, marking the third consecutive month of gains. The data is unlikely to have much market-moving potential however as its implications for near-term monetary policy are probably very limited considering the relatively dovish posture taken by the European Central Bank at the last interest rate announcement. Indeed, a survey of economists polled by Bloomberg suggests Jean-Claude Trichet and company will keep benchmark borrowing costs unchanged at a record-low 1% through the third quarter of this year.
On balance, risk sentiment is likely to remain the dominant driver of price action. European equity index futures are trading over 1% lower ahead of the opening bell as traders fret about fading stimulus measures after China pushed ahead with restricting lending growth while US President Obama prepared to announce a 3-year discretionary spending freeze at tomorrow’s annual State of the Union address, which likely points to continued gains for the safety-linked US Dollar and Japanese Yen.
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