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Franc Gains as ECB Shuns Greek Bonds, Pound to Look Past Static BOE

Franc Gains as ECB Shuns Greek Bonds, Pound to Look Past Static BOE

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Franc Gains as ECB Says Greek Bonds Unacceptable as Collateral
  • Australian, New Zealand Dollars Rise After China’s 50bps RRR Cut
  • Bank of England Rate Decision Likely a Non-Event for the Pound

The Swiss Franc outperformed in overnight trade, rising as much as 0.3 percent on average against its top counterparts. The move appears to have reflected regional safe-haven flows after the ECB announced that it will no longer accept Greek government bonds as collateral for lending.

That sent jitters across financial markets amid worries of oncoming capital shortages and potential bank failures in the event Greek lenders run short on liquidity. Reports suggesting the central bank will make the ELA emergency facility available dampened concerns to some extent however.

The Australian and New Zealand Dollars likewise pushed higher, adding as much as 0.5 and 0.3 percent respectively against the majors. The move appeared to reflect optimism linked to the PBOC, which unexpectedly announced a 50 basis point cut in its reserve requirement ratio.

China is Australia and New Zealand’s largest trading partner and markets likely speculated that an easing of monetary policy that boosts growth there may bode well for the two Oceanic countries’ export demand profiles. That may in turn translate into better overall growth prospects and limit scope for on-coming RBA and RBNZ interest rate reductions.

A monetary policy announcement from the Bank of England headlines the economic calendar in European trading hours. Mark Carney and company are widely expected to keep the status quo in place, meaning no statement is likely to be issued. That will probably mean the announcement will amount to a non-event for the British Pound, with the currency waiting for next week’s quarterly Inflation Report for policy cues.

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Asia Session

GMTCCYEVENTACTEXPPREV
0:00AUDHIA New Home Sales (MoM) (DEC)-1.9%-2.2%
0:30AUDRetail Sales s.a. (MoM) (DEC)0.2%0.3%0.1%
0:30AUDRetail Sales Ex Inflation (QoQ) (4Q)1.5%1.1%0.9%

European Session

GMTCCYEVENTEXPPREVIMPACT
6:45CHFSECO Consumer Confidence (JAN)-13-11Low
7:00EURGerman Factory Orders s.a. (MoM) (DEC)1.5%-2.4%Medium
7:00EURGerman Factory Orders n.s.a. (YoY) (DEC)0.7%-0.4%Medium
8:30EURMarkit Germany Construction PMI (JAN)-50.5Low
9:00GBPNew Car Registrations (YoY) (JAN)-8.7%Low
9:00EURECB Publishes Economic Bulletin--Low
9:10EURMarkit Germany Retail PMI (JAN)-51.7Low
9:10EURMarkit Italy Retail PMI (JAN)-42.8Low
9:10EURMarkit Eurozone Retail PMI (JAN)-47.6Low
9:10EURMarkit France Retail PMI (JAN)-46.5Low
12:00GBPBank of England Rate Decision0.50%0.50%High
12:00GBPBOE Asset Purchase Target (£)375B375BHigh

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.10441.12131.12791.13821.14481.15511.1720
GBPUSD1.49671.50791.51301.51911.52421.53031.5415

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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