Fxpro Daily Briefing

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07/11/12 @ 08:20 GMT by Simon Smith, Chief Economist

Data/Event Risks

• USD: Even though the result has come through, scope for volatility remains as positions are adjusted.

• EUR: German production data of most note, given risk of further slip into recession into year-end, but weaker numbers not likely to have major impact on EUR, with USD risks dominating.

• AUD: Labour market data is out early Wednesday. After RBA kept rates on hold this week, market likely to be more sensitive to domestic data.


Idea of the Day

So it’s over, but it isn’t. Obama’s victory was stronger than expected. At the same time, the balance in the Senate has shifted slightly more towards the democrats and at present the House is looking more Republican. FX markets are notorious for being single-minded, so with the election over, it’s time to concentrate on the fiscal cliff, the impact of which starts on 1st January next year. On paper at least, this election has significantly decreased the likelihood of a workable compromise ahead of then. We’ll likely get one, but it will be painful, messy and last minute. The dollar will struggle on this, although this may take time to come through.


Latest FX News

• USD: .Dollar index is around 0.40% lower in the wake of the election result, which reflects factors such as policy gridlock, greater likelihood of Bernanke remaining head of Fed.

• GOLD: Reversing the weakness seen towards the end of last week on the back of Obama victory.

• JPY: Some volatility on the yen overnight as the initial down-move on USD/JPY was partially recovered into the European session.

• AUD: Data showed FX reserves increasing in August, with UBS also highlighting rise in deposits of foreign institutions held at the central bank increasing as well. Suggestion that RBA is “printing Aussie dollars” to satisfy demand from foreign central banks.

http://www.youtube.com/watch?v=A2FEbOWmL7I

 

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The price of complacency

08/11/12 @ 08:28 GMT by Simon Smith, Chief Economist

Data/Event Risks

• USD: Data takes second place to post election sentiment, which yesterday hit stocks pretty hard as fiscal cliff concerns dominated.

• EUR: ECB meeting brings low risk of rate change, but as always there are risks around press conference. That said, Draghi appears to throw far fewer ‘curve-balls’ than his predecessor.

• GBP: The MPC decision is at 12:00. Relatively strong consensus for no change on asset purchases. Current round has ended, but inflation and some better growth numbers stand in way.


Idea of the Day

Yesterday reflected the division of opinions on the implications of the US elections. The dollar was softer in Asia, but came back in the European session with the weakest 1-day stock market performance for over 5 months holding the risk-averse tone. What remains notable is the low level of volatility in FX markets, with the CVIX (overall volatility measure from Deutsche Bank) at levels last seen in late 2007. Lows were reached in the VIX (similar measure for US equities) in mid-August, with this measure rising since then. In other words, equities are more fearful of future volatility than FX. But given the divergent opinions on both the US fiscal cliff outcome and on how Spain’s bailout will develop (more on this next week), are FX markets a little too complacent on the risks? There’s a strong case for suggesting they are.


Latest FX News

• USD: .A messy day for stocks, with S&P down 2.4%, the biggest once day fall since 1st June. Dollar gained on general risk aversion, with weaker Asia stocks likely to keep cautious tone today.

• EUR: German trade data modestly better than expected early on at EUR 16.9bln. Both exports and imports falling, suggesting better trend of recent months may struggle to continue. Greece approved austerity package, so likely to receive another stay of execution from troika.

• JPY: Interesting data o/n showing Japanese investors loading up on foreign government bonds in Sep, both US and German paper. Weaker yen in Oct means that was a good move for them.

• AUD: Decent labour market numbers, with unemployment rate falling to 5.4% and employment rising by 18.7k, just above average of 15k over prior 3 months. AUD initially stronger, wandered lower since.

• NZD: Big jump in the unemployment rate for Q3, up from 6.8% to 7.3%. Highest rate since 1999. NZD hit hard on the back of this, undermining recent good run vs. both USD and especially AUD.

http://www.youtube.com/watch?v=yaCRvCpqMQQ&list=PL8302B08FD7185AF3&index=6&feature=plcp

 

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Watching and waiting

12/11/12 @ 07:52 GMT by Simon Smith, Chief Economist

Data/Event Risks

• USD: Veteran’s day holiday, so trading will be very subdued.

• EUR: Finance ministers meet in Brussels later today and although this does bring event risk, it’s not major given that most of the disappointment with regards to Greece and also Spain has been factored into the price.


Idea of the Day

Last week was notable for better signs of breakouts from recent ranges and this brings in key levels to watch today. On EUR/USD, levels not seen since the ECB announcement early Sept. on its revised bond buying program are being tested. The 1.2671 level is key trendline support from here. For now, it looks like this should remain safe, but after this week’s finance minister’s meeting, we are unlikely to get fresh policy impetus in Europe and the much maligned approach of ‘muddling through will take over. Meanwhile, the boost from the Sept. ECB announcement will continue to fade as Spain remains reluctant to ask for assistance. This is not a credible solution longer-term.


Latest FX News

• JPY: The fall in Q3 GDP was in line with expectations at -0.9% QoQ. Data showed economy fairly weak in most sectors, with Nikkei down nearly 1% and yen holding steady around 79.50.

• AUD: Data overnight showed home loans rising 0.9% MoM, broadly in line with expectations. Lending trend has been improving recently. AUD modestly bid, up to 1.0420 area in Asia.

• EUR: The Greek parliament approved the 2013 budget over the weekend. This paves way for next loan tranche payment, although this is not likely to happen this week. EUR/USD drifted slightly higher through Asia session towards 1.2730.

• CNY: Data on new loads were softer in Oct, down 14% vs. last October. Govt has been pushing more lending so data is modest disappointment. But trade data out on Saturday was stronger, showing exports rising 9.9% YoY.

http://www.youtube.com/watch?feature=player_embedded&v=bgu6Ubfhdsw

 

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Fresh concerns

13/11/12 @ 08:03 GMT by Michael Derks, Chief Strategist

Data/Event Risks

• USD: Fiscal cliff discussions rank ahead of economic news in the near term. The president will meet House and Senate leaders on Friday. Both sides are sounding hopeful of a deal, but it remains to be seen if compromise can be achieved.

• EUR: Second-tier releases today, with Spanish and Italian CPI followed by German ZEW. Ecofin meeting tonight in Brussels, with Greek aid at the top of the agenda.

• GBP: Lots of event-risk in coming days, with RPI/PPI today, followed by jobs and wages data tomorrow and retail sales on Thursday. Should labour market and spending reports indicate that the economy is faltering then sterling will react negatively.


Idea of the Day

Clear disagreements exist within Europe regarding Greece, which weighed on both the euro and risk assets overnight. Not helping was news that Microsoft President Sinofsky was departing after 23 years. No need to fight the tape at present – both the dollar and the yen are creeping higher, while the euro consistently slides.


Latest FX News

• EUR: The gradual downtrend continued overnight amidst fresh concerns on Greece. Lagarde claimed more work needed to be done on Greek debt sustainability over coming days. Key technical levels down near 1.2640.

• JPY: Benefitted from more risk-averse backdrop, despite confirmation of plunge in industrial production in September. Lots of discussion in Tokyo regarding additional monetary action, including the purchase of foreign bonds by the BoJ.

• AUD: Suffered for a time alongside weak Asian equity markets. Weak NAB business survey contributed to the sombre mood. All things considered, still looks well-supported.

• CNY: Reached a 19yr high yesterday, helped by decision to raise quota for RQFII by RMB 200bn. Note that spot RMB trades at the maximum 1% premium to the reference rate. Indeed, reference rate has barely changed in recent weeks. Expect PBOC to resist pressure for yuan appreciation.

http://www.youtube.com/watch?v=kIiMy3i3Hd4&feature=share&list=PL8302B08FD7185AF3

 

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Be fleet-footed

14/11/12 @ 08:01 GMT by Michael Derks, Chief Strategist

Data/Event Risks

• USD: Busy agenda with retail sales and PPI at 13:30, business inventories at 15:00 and FOMC Minutes at 19:00. Retail sales arguably the most critical – US consumer has been quite buoyant recently. If this continues then the dollar should benefit. Obama to hold press conference at 18:30.

• EUR: Little else other than EU industrial production out at 10:00. Greek developments and Spain still the main movers for the single currency near term.

• GBP: Jobs data and Quarterly Inflation Report out later. Both might help the currency, as employment has been strong recently and inflation is sticky, which thwarts additional QE, at least short term.


Idea of the Day

Expect some volatility in the majors today amidst an intensification of event risk. Plenty of data releases in both the US and UK, election uncertainty in Japan, Greek concerns in Europe and then President Obama’s press conference later. Traders need to be especially fleet-footed.
Latest FX News

• EUR: Was lower for a time, not helped by weak ZEW, before Bild article claiming Germany was prepared to write a big cheque to Greece provided the euro with a brief boost. Even so, it is clear that fundamental differences exist between EU and IMF over Greek debt-sustainability.

• JPY: Weaker overnight after PM Noda declared preparedness to call an election. USD/JPY at 79.85 after triggering buy stops on the way up. Expect resistance in the 80.30-80.50 region. EUR/JPY at 101.50 after dipping below 101 overnight; seems to be forming a base.

• GBP: Higher inflation figures boosted the pound for a time, which was already attracting buyers against the euro. EUR/GBP cross fell to 0.7970 at one point before profit-taking ahead of today’s figures. Dollar strength weighed on cable as the day progressed.

• AUD: Resilient once more, despite healthy dollar. Aussie still attracts buyers – some view dollar as vulnerable because of the fiscal cliff, euro as suspect because of Greece and Spain, and the yen as risky because of high government debt and recession. Moody’s reaffirmed AAA status.


http://www.youtube.com/watch?v=1GPfE1wbeAg&feature=share&list=PL8302B08FD7185AF3

 

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The yen’s timely demise

15/11/12 @ 08:06 GMT by Michael Derks, Chief Strategist

Data/Event Risks

• USD: Watch fiscal cliff debate closely as hotting up already. Obama will ask Republicans for USD 1.6trln in tax cuts, double what he demanded in the summer of 2011. Plenty of data as well today, including claims, CPI and Philly Fed.

• EUR: A busy agenda, with SP and IT GDP, before EU GDP at 10:00. EU still at loggerheads with IMF re Greece – this remains critical for the euro. Europe effectively on strike yesterday, amidst widespread social unrest at perpetual austerity.

• GBP: Retail sales the main focus today. Recent months suggested UK consumer doing better. If reconfirmed today, then the pound may recover some of yesterday’s losses.


Idea of the Day

Lots of forex themes in play yesterday – yen weakness despite big down-day in stocks, euro-short squeeze, and sterling softness after Inflation Report. Volatility in the majors likely to continue short term. Stay alert to rapid mini-trend changes. Favour the dollar while risk appetite wanes. Gold looks vulnerable.


Latest FX News

• EUR: Classic short-squeeze in the morning, despite dreadful data out of Spain and Italy. Even so, traders should be troubled by the uncertainty re Greece aid. IMF clearly unhappy with EU approach. Euro has done well vs. Aussie, sterling and yen over the past 24 hours – can it continue?

• JPY: A huge victory for yen shorts yesterday and overnight, following news that Noda has called an election for mid-December. Japan desperately needs a weaker currency, because corporate sector specifically, and economy more generally, is in dire trouble. LDP will push BoJ very hard if elected.

• GBP: Suffered after the Inflation Report. King expresses concern re pound resilience and leaves door open for more QE. Still, the damage to the currency was quite minor.

• AUD: Much-trumpeted resilience has given way slightly, with Aussie down to 1.0350 overnight. Lots of sell stops triggered; big dump in equities not helpful either. More weakness likely near term if risk repulsion continues. But be careful because SWFs probably lurk at lower levels.


http://www.youtube.com/watch?v=jZhHEDQUNm0&feature=share&list=PL8302B08FD7185AF3

 

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Back to form

19/11/12 @ 08:51 GMT by Simon Smith, Chief Economist

Data/Event Risks

• USD: Existing home sales data should not rock the boat. Focus on fiscal cliff negotiations, but no key developments expected today.

• EUR: Headlines on Greece still a risk ahead of finance ministers meeting tomorrow when final details of next loan tranche expected to be agreed.


Idea of the Day

FX markets moved back to form on Friday. EUR/USD completed the sharp up-move, with the even sharper up-move on USD/JPY also taking a breather. These were mostly down to flow and positioning. The question is whether they are likely to continue. Yen weakness looks more likely to be sustained in the run-up to the election, but we really need to take out some key levels to make it look convincing. On USD/JPY, 81.49 (Fibonacci March high, Sept. low) is the initial target for the bulls, which was briefly breached overnight.


Latest FX News

• EUR: Like it or not, focus remains on Greece with meeting of finance ministers tomorrow to agree final details on latest aid package. IMF still sounding vocal on its differences.

• USD: Weaker for most of late NY and early Asia trade. Focus remains on fiscal cliff negotiations, which remain on-going. US Treasury Secretary Geithner sounding positive Friday. Modest risk appetite evident in Asia equities, dollar tone softer.

• JPY: Key focus on Bank of Japan meeting this week, but no major change in policy likely until after the election next month. Yen holding above 81.00 in overnight trading.

• GBP: Latest Rightmove house price data showed prices falling -2.6% in Nov. after 3.5% rise in Oct. Rising in annual terms to 2.0%. London still strong from overseas demand. GBP crawling higher overnight.

• AUD: Firmer vs. both JPY and USD in Asia trade with sentiment modestly positive towards risk assets at start of the week.

• NZD: Soft PPI inflation data released overnight, outputs falling 0.9% QoQ. Data of modest interest to the currency, but initial strength vs. AUD has been partially unwound, AUD/NZD above 1.2708 low.

 

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Throwing more bricks at Greece

20/11/12 @ 08:08 GMT by Simon Smith, Chief Economist

Data/Event Risks

• USD: Housing Starts data not a major event risk, but stronger data (as seen with yesterday’s housing data) could support better tone to risk.

• EUR: Finance ministers meet on Greece deciding on next bailout payment and further short-fall in funding from relaxation of last week’s targets. Risk for late session volatility, especially given divisions with the IMF.


Idea of the Day

The euro was buoyed into the close yesterday on reports that today’s meeting was likely to lead to loan disbursement for Greece (although then hit by France downgrade overnight). More importantly is how the shortfall from the extension of the deficit target last week (over EUR 30bn) is going to be covered. This is where the cracks emerged with the IMF, which thinks that the public sector (including the ECB) has got to take a hit on its substantial exposure to Greece. By piling on more debt, EU leaders are effectively throwing bricks at a drowning man, which is why the Greek economy is sagging ever deeper into depression. As always, the short-term fix is not the longer-term solution.


Latest FX News

• EUR: Lower early Asia on Moody’s downgrade of France, from top rating of Aaa to Aa1 with negative outlook maintained. EUR was squeezed higher late in the European session, on combination of short-covering and positive headlines on further loan payment to Greece.

• USD: Modestly softer through Monday on the back of more positive sentiment towards fiscal cliff resolution, with this also providing support for equities (S&P up 2%).

• JPY: No surprise to see the Bank of Japan holding fire on further stimulus measures following its policy meeting. Some modest yen short-covering but holding tight to yesterday’s range. BoJ governor pushing back against pressure from opposition leader Abe.

• GBP: Greater focus this week on strains within the EU as UK PM Cameron refuses to sign off on the latest budget plan. Sterling not moved on news, but worth keeping an eye on.

• AUD: RBA minutes showed the central bank keeping hopes of easing alive, but AUD largely unmoved. Note that IMF is looking at classifying both AUD and CAD as reserve currencies. This would mean we get more detailed data on central bank holdings in the future.


http://www.youtube.com/watch?v=2_YP-98zqG4&feature=share&list=PL8302B08FD7185AF3

 

[kapak]

Dollar in demand

21/11/12 @ 08:02 GMT by Michael Derks, Chief Strategist

Data/Event Risks

• USD: Plenty of economic news today, including jobless claims, Markit preliminary PMI, Bloomberg consumer comfort and University of Michigan confidence.

• GBP: MPC Minutes will (as usual) be closely scrutinised, but on this occasion unlikely to be market-moving.


Idea of the Day

The dollar has continued to climb overnight and we believe it will continue to rise in the near term. Unsurprisingly, the Eurogroup was unable to narrow its differences with the IMF on Greece despite 11 hours of discussions – in response the euro has dropped back to 1.2750. Geo-political tensions in the Middle East help the dollar, as does the growing sense that America’s political leaders will do a deal to avoid a precipitous fiscal cliff. Also, the American economy is still delivering positive surprises. Keep the faith – stay with the greenback.


Latest FX News

• EUR: Dissecting the failure of the troika to narrow its differences over Greece will be the major focus today, and could well result in some further euro-selling. Ultimately, the only feasible solution to get Greek debt back on a sustainable path is to force the official sector to accept significant haircuts. Right now, Europe would sooner lose its right arm than agree to this. Euro needs to fall further to put more pressure on politicians to sort out this mess.

• USD: Very much in demand given Greece, a fragile Japan, geo-political developments and improving American economic data. HP accounting fraud stimulated risk-aversion, aiding the greenback. Still looks bid against most majors. Fiscal cliff negotiations still critical - on hold for the next week or so.

• JPY: Continues to falter, with USD/JPY reaching a 7mth high. Tokyo will do absolutely nothing to discourage yen weakness. LDP still pressuring the BoJ to implement ‘drastic easing’; also declares intention to opt for massive fiscal stimulus, to increase military personnel levels and station officials on disputed islands. On this basis, yen weakness looks set to continue if the polls continue to favour the LDP.

• AUD: Softened yesterday afternoon amidst risk-aversion backdrop. That said, selling still seems remarkably guarded. Traders seem happy to sell the yen and the euro, but less comfortable being short Aussie.



http://www.youtube.com/watch?feature=player_embedded&v=qfgX1fbkxcE
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