Two days of US Federal chair Janet Yellen testimony left the market entirely without a “takeaway” or catalyst to alter its view on the US dollar, which merely defaulted slightly to the weaker side, remaining in limbo versus the euro and yen, and generally weaker against sterling and the commodity currencies.
It’s tough to see what the next catalyst will be for this market as the most important next round of USD data doesn't arrive until next week. We have an end-of-month fixing into tomorrow.
SEK rallied in the wake of Riksbank minutes that brought little enlightenment or reaction in Swedish rates. One member even dissented from the decision to start the symbolic quantitative easing purchase, while the vote to cut the interest rate into negative territory was unanimous. The krona rallied even despite assurances from the minutes that additional unconventional policy and moves between regularly scheduled meetings were a possibility.
AUD weakened sharply overnight on the Q4 capital expenditures number, which saw a 2.2% fall quarter-on-quarter. This nipped the attempt above 0.7900 in AUD/USD in the bud and nixed the AUD/NZD rally attempt as well. We have an Reserve Bank of Australia meeting next Tuesday and this market is highly reactive to data as the rate cut at that meeting is not fully priced into consensus expectations, though the Australian two-year rate dipped to new record lows overnight.
GBP is pushing aggressively higher ahead of today’s Q4 GDP revision and related figures, which are expected to show a slight downward revision to a still solid +2.7%. Note that exports are only looking to grow +1.1% over the same period, an ongoing reminder of the UK’s ugly structural problem, which is only plastered over by large capital inflows to offset the world’s worst twin deficit and much of the currency’s resilience is on the policy divergence of the Bank of England vs. European Central Bank and the slide in EUR/GBP.
Chart: GBP/USD
To be fair, the GBP/USD sell-off was spectacularly consistent and brutal, and this recent rally is so far relatively modest in comparison. Even a 38.2% retracement of the entire sell-off wave from the 1.72+ top to the sub-1.50 low doesn't come in until just above 1.5800. Watch for a test higher still if today’s UK data is supportive and if we get a weak batch of US data today and/or next week. 
Source: Saxo Bank
The G-10 rundown:
USD: Struggling to get a view. The US Fed has said that it will look through low inflation, so it's questionable how much today’s CPI release generates interest. Another bad Durable Goods Orders numbers, after three previous bad ones, will encourage those questioning the strength of the US recovery.
EUR: Generally passive and to the weak side ahead of the start of QE next week. Confidence surveys. Waiting for resolution in EUR/USD as the strongest trend in years has been leaking momentum for four weeks now.
JPY: Watch out for raft of Japanese data out overnight and Kuroda out speaking. JPY is refusing to make a technically decisive move on the charts. This can’t continue forever, though recent bouts of range-bound activity have shown that it can continue for a remarkably long time. Watching 118 and 120 in USDJPY.
GBP: Market may be reactive to the details of today’s GDP report as GBP has pushed aggressively higher versus the euro and the US dollar.
CHF: Not sure where the market is looking for catalysts here, so watching EUR/CHF levels 1.0650 and 1.0810.
AUD: Next week is a big one for AUD, with plenty of data and the RBA on Tuesday. By next Friday, we should know where the AUD stands.
CAD: Rallied on recent Poloz comments and now defaulting to the upticks and downticks in the oil price. Watching the 1.2365/1.2400 area in USD/CAD.
NZD: Strong on a weak AUD. NZD/USD rallying towards key 0.7600/50 zone.
SEK: A break yesterday back into the range below 9.48/9.50 in EUR/SEK, which is now the resistance as the main support looks like 9.27, the range low and 200-day moving average.
NOK: Passively pushed around by the oil price, but shouldn't the market have picked up more on that nasty plunge in consumer confidence? Prefer weakness, though without data, one might as well be trading oil futures. Also, a break of the range low in EUR/NOK could trigger stops. Tomorrow we get Jan. Retail Sales and Feb. Unemployment Rate.
Solid GDP figures are pushing the pound higher, but the UK's current account remains firmly in the red. Photo: istock
Economic Data Highlights
- New Zealand Jan. Trade Balance out at +56M vs. -158M expected and -195M in Dec.
- Australia Q4 Capital Expenditure out at -2.2% QoQ vs. -1.6% expected
Upcoming Economic Calendar Highlights (all times GMT)
- Sweden Jan. Trade Balance (0830)
- Germany Feb. Unemployment Change and Unemployment Rate (0855)
- UK Q4 GDP estimate (0930)
- Eurozone Feb. Industrial/Consumer/Economic/Service Confidence (1000)
- Canada Jan. CPI (1330)
- US Jan. CPI (1330)
- US Jan. Durable Goods Orders (1330)
- US Weekly Initial Jobless Claims (1330)
- New Zealand Jan. Building Permits (2145)
- Japan Jan. Jobless Rate (2330)
- Japan Jan. Overall Household Spending (2330)
- Japan Jan. National CPI (2330)
- Japan Jan. Retail Trade (2350)
- New Zealand Feb. ANZ Activity Outlook/Business Confidence (0000)
- UK Feb. GfK Consumer Confidence (0005)
- Japan Bank of Japan’s Kuroda to Speak (0330)