"That's not a knife, this is a (falling) knife"
Speaking live from Saxo Bank's Asian desk in Singapore, Christoffer Moltke-Leth tells us that Australia's shocking employment report has sent the Aussie dollar into a tailspin and has prompted a new round of speculation about further Reserve Bank of Australia interest rate cuts.
After falling to 6.1% in December, Australia's unemployment rate surged to 6.4% in January with the country lost over 12,000 jobs – twice as many as had been forecast.
The Aussie then plunged over half a cent against the USD, hitting 0.7650 in the Asian session.
Elesewhere, Moltke-Leth says that headlines regarding the ongoing Greek stalemate hit Asian markets early, causing a minor, 13-point retreat in EURUSD. Conversely, USDJPY currently sits at the top of the Ichimoku cloud – a bullish sign for the yen.
Following the From the Floor call, the Bank of Japan issued a statement ruling out "extra stimulus" that impacted USDJPY as head of forex strategy John Hardy notes here and here.
USD bears: an endangered species
The US dollar, meanwhile, is looking strong, says Hardy, but its rally is not yet "a full-court press" as it remains relatively soft
against the European majors.
Hardy says that there may be some reluctance to trade EURUSD in light of the unresolved nature of the Greek debt talks, which are now scheduled to roll into Monday.
Concerning the talks' effect on the euro, Hardy says that there are "no new signs of nervousness", adding that EURCHF now sits around 1.05 after briefly heading north of that level.
Today will see two important events in the European forex sphere, with Sweden's Riksbank meeting this morning and the Bank of England releasing its quarterly inflation report as well.
As of press time, the Riksbank has announced that it will cut its repo rate and launch a government-bond buying programme worth SEK 10 billion.
We will see how markets react to the news.
Over on Threadneedle Street, Hardy says that there is some speculation about a hawkish Bank of England statement, but adds that given Britain's low inflation rate could limit the bank's latitude in that regard. Looking at the pairs, Hardy says that EURGBP tried new cycle lows today while the Cable traded in a higher range.
The Bank statement presents a two-way risk, says Hardy, adding that he sees EURGBP as a sell on a sterling-positive result and the Cable as a sell on a sterling-negative one.
Finally, Hardy says that the Australian jobs report confirms the AUD downtrend and opens the possibility of AUDUSD trading below .75 and beyond.
Something's got to give
Saxo Bank FX Options trader Gustave Rieunier says that today's euro activity reflects the ongoing uncertainty concerning Greece.
Essentially, says Rieunier, we are waiting for a move in either direction as volatilities trade sideways.
Concerning the Australian news, Rieunier says that the print produced a lower front-end vol as would be expected, but noted that the back end remains bid as spot charts show "an empty space" below 0.76020 and no supportive information for the medium- to long-term has made itself known.
Twenty pounds of headlines
Speaking live from Saxo Bank headquarters in Copenhagen, fixed income head Simon Fasdal said that bond traders are watching for headlines as the situations in both Greece and Ukraine continue to weigh on Europe.
The current instability and its consequent risk-off sentiment has produced a spike in Bunds, which are currently trading close to their recent highs at 159. The biggest hurdle, says Fasdal, is Greece as its debt issues could mute the initial impact of the European Central Bank's QE programme in the areas "where it is needed most".
Pointing to his weekly bond update posted yesterday, however, Fasdal emphasised that there remains a strong case to be made for riskier assets in the longer term. In the update, Fasdal stressed that he does not see the Greek situation as likely to lead to a catastrophic Eurozone break-up, and that he is relatively sanguine about the prospects for global growth.