No new developments from the Greek situation yesterday, as the meeting dragged on until very late (what exactly were they thinking when they got underway so late yesterday?). The two sides couldn’t even agree on a joint statement to release and will convene again on Monday to discuss the situation further.
The market decided that no news, or signs that the discussions would continue, was a euro positive, as EURCHF rallied back above 1.0500 and EURUSD remained in the 1.1270-1.1350 limbo that has contained it all week. Something has to give there.
GBP bulls are cowering ahead of the Bank of England inflation report after a RICS house price balance release overnight suggests that the UK housing market continues to lose momentum. Hard to know what to expect from this report today, as we have strong UK data and complacency on the forward policy anticipations to suggest solid risk of an upside surprise potential.
Then again, with inflation so low and EURGBP pressing on seven-year lows, one wonders if sterling strength is becoming a factor in the Bank of England's consideration as a downside inflation risk.
The big risk today in terms of potential volatility is the Riksbank meeting up this morning, probably hitting the market before you are even reading this. On the menu are whether there will be quantitative easing programme, and if so, its size and composition.
Could the Riksbank decide to wait a little longer after a string of positive data releases of late? Look for the follow up press conference at 10:00 from governor Stefan Ingves as the market will be all over the place trying to draw conclusions if a strong new programme is not announced with the statement release.
Very high gap risk either way... I suspect if the gap is to the downside, it could be potentially very large but not necessarily lead to follow-on action. I also suspect that, as the Riksbank’s primary concern is very low inflation, it will strive to avoid an announcement that shocks the SEK stronger.
QE or not QE? Swedish central bank decides today. Photo: iStock
Chart: AUDUSD hourly
AUDUSD rushed lower in the wake of a weak unemployment rate as it looks at the range lows at 0.7625 and beyond. The resistance now drops down to 0.7700/25, the area the pair was trading ahead of the employment report announcement. 
Source: Bloomberg, Saxo Bank
Up later today after the Riksbank and BoE Inflation Report:
- US Jan. Retail Sales – the December number was weak and one wonders if record winter weather could continue to suppress retail sales.
- US weekly jobless claims – these have been very strong of late
- Norges Bank’s Olsen will give an annual speech today, and we should expect policy hints. I suspect that Norges Bank would be very happy to see a weak NOK as long as the oil price is below 80, as it eases the pain of the shock lower in oil prices (the weaker NOK vs. the USD has eased at least 25% of the pain in lower prices in NOK terms). We saw a bullish outside day in EURNOK yesterday after strong Norway GDP number yesterday, so risk is perhaps to the downside in NOK from a technical perspective.
The G-10 rundown:
USD: Firmly on a rally track, but this hasn’t yet spread to the European majors, which must fall versus the mighty greenback today if we are to talk up the USD’s continued potential.
EUR: Things have gone too quiet. Still prefer a downside resolution to the proceedings here, but seeing is believing after three days in total limbo. 1.1270 is the downside range break point in EURUSD.
JPY: Generally weak, though not as weak as yesterday. All about whether USDJPY can maintain head of steam above 120.00 over the next couple of days.
GBP: two-way risks on today’s Bank of England inflation report. EURGBP 0.7400 and yesteday’s lows the focus on GBP positive developments and 1.5200 the focus on GBP negative developments.
CHF: EURCHF slipping back and forth around 1.0500 as no clear emerging from the EU/Greece talks. USDCHF focus will be on that 200-day moving average just above 0.9300 if the USD strength broadens .
AUD: pounded on a weak jobs report that saw the unemployment rate flying up to a new cycle high and the worst since 2002. Supports the bearish trend for AUDUSD and a test through the 0.7625 lows and possibly toward 0.7500 eventually.
CAD: USDCAD almost touched 1.2700 yesterday but then pulled back very sharply, perhaps due to the rebound in oil prices. Will keep the focus on the upside as long as the pair finds support in the 1.2600/1.2550 zone.
NZD: NZDUSD drifting lower on USD strength, but NZD remains strong against the hapless AUD. Waiting for the next catalyst, which technically would be at the lows down near 1.0350 in AUDNZD or the 0.7325 area in NZDUSD.
SEK: A huge day for SEK, look for brutal price action/gaps meaning high risk/high reward for those with positions on ahead of the Riksbank.
NOK: Oil prices are one focus, but so is the bounce in EURNOK yesterday and a speech late this afternoon from Norges Bank’s Olsen, at which he will likely drop policy hints.
Economic Data Highlights
- New Zealand Jan. BusinessNZ Manufacturing out at 50.9 vs. 57.1 in Dec.
- Japan Jan. PPI out at -1.3% MoM and +0.3% YoY vs. -0.6%/+1.1% expected, respectively and vs. +1.8% YoY in Dec.
- Japan Dec. Machine Orders out at +8.3% MoM and +11.4% YoY vs. +2.3%/+5.6% expected, respectively and vs. -14.6% YoY in Nov.
- UK Jan. RICS House Price Balance out at 7% vs. 12% expected and vs. 12% in Jan.
- Australia Jan. Employment Change out at -12.2k vs. -5k expected and vs. +42.3k in Dec.
- Australia Jan. Unemployment Rate out at 6.4% vs. 6.2% expected and vs. 6.1% in Dec.
Upcoming Economic Calendar Highlights (all times GMT)
- Sweden Riksbank Interest Rate/Policy Announcement (0830)
- Sweden Jan. Unemployment Rate (0830)
- Euro Zone ECB’s Praet to Speak (0905)
- Sweden Riksbank Governor Ingves discusses Riksbank decision (1000)
- UK Bank of England Quarter Inflation Report (1030)
- Canada Jan. Teranet/National Bank Home Price Index (1330)
- US Jan. Retail Sales (1330)
- US Weekly Initial Jobless Claims (1330)
- Norway Norges Bank’s Olsen to Hold Annual Speech in Oslo (1700)
- Euro Zone ECB’s Constancio to Speak (1810)
- Euro Zone ECB’s Weidmann to Speak (1815)
- Australia RBA’s Stevens to Speak (2230)