Market Brief
In the FX markets the USD was broadly weaker as traders square shorts. Yesterday, US inflation data provided support for the hawks as core CPI came in slightly stronger than expected, although headline reading fell sharply. In addition, Durable Goods Order surprised to the upside. Throw in some comments from hawkish FOMC non-voting member Bullard and your have all the makings of a strong USD rally. After a short period of consolidation, we anticipate the USD will begin to head higher (supported by uptick in yields). In Asia, trading was subdued as the Nikkei was up 0.06%, the Shanghai composite rose 0.36% and the Hang Seng increased 0.10%. European stocks are mixed but DAX index reached a new record high. EUR/USD climbed slowly to 1.1217 as traders continued to square shorts following yesterday massive plunge. Despite the current USD weaknesses yesterday EUR/USD downside breakout turns the focus on 1.1098 support. USD/JPY reverse earlier loss at 119.12 as US yields rebounded and expectations of Fed tightening increased. USD/JPY needs to break above 119.96 to see an extension of bullish rally to barrier resistance at 120.50. Australia’s private sector credit increased 0.6%m/m in January just above expectations and prior increase of 0.5% in December. AUD/USD regained earlier loses, rallying to 0.7825. With markets expectations for RBA easing next week rising focus will be on a retest of 0.7780. New Zealand’s building permits fell 3.8% m/m in January while ANZ business confidence was upgraded by 4 points to 34.4 in February. NZD/USD traded in a sideways pattern between 0.7536 and 0.7558 for most of the Asian session.
In an overwhelming majority, German lawmakers signaled that they would agree to the extension of Greece’s bailout plan. However, there is a substantial concern that Athens will fail to live up to their new reform plan. Elsewhere, Bank of Greece Governor Yannis Stournaras said that Athens must quickly reached a final agreement with creditors and reforms to carry on. Stournaras went on to say that should the uncertainty get lifted the Greece economy could remain on path for positive growth this year. Perhaps playing-up the "mediator" a bit in a speech to Bank of Greece shareholders he stated “in order to make the most of this window of opportunity, negotiations with our partners must continue in a spirit of cooperation and trust so that we can soon reach a final agreement that will be mutually beneficial.” We are deep concern with the ability of the new Greek government to move forward with reform measures and expect European will be in the same position in four months. This political uncertainty combined with policy divergence underpins our bearish expectations for EUR/USD.
Wealth of data was released from Japan. Japan’s industrial production jumped 4.0%m/m in January stronger then expected growth of 2.7%, and previous 0.8% rise in December. This was the fastest acceleration since mid-2011. On the other hand retail sales fell -2.0%y/y in January again expected fall -1.2%. On the inflation front, Japan’s CPI rose 2.4%y/y in line with expectations, while annual core inflation was up 2.2% in January falling from 2.5% in December. CPI excluding food and energy rose 2.1%yoy in January. Tokyo’s CPI rose 2.3%y/y against market expectations of 2.2% rise. Inflation trend is now moving downwards indicating that by September we should see BoJ move forward with additional QQE.
On the docket today we have flash German HICP inflation, Swedish Q4 GDP, Norwegian unemployment, US Q4 GDP, Consumer Sentiment, and plenty of Fed speakers. Participating at Monetary Policy forum, Fed Vice Chairman Fischer, NY Fed President Dudley and Cleveland Fed President Mester.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| FR Jan PPI MoM | - | -0.90% | EUR / 07:45 |
| FR Jan PPI YoY | - | -2.90% | EUR / 07:45 |
| FR Jan Consumer Spending MoM | - | 1.50% | EUR / 07:45 |
| FR Jan Consumer Spending YoY | - | 0.50% | EUR / 07:45 |
| GE Feb CPI Saxony YoY | - | -0.30% | EUR / 08:00 |
| GE Feb CPI Saxony MoM | - | -1.20% | EUR / 08:00 |
| SZ Feb KOF Leading Indicator | - | 97 | CHF / 08:00 |
| SP Feb P CPI EU Harmonised YoY | - | - | EUR / 08:00 |
| SP Feb P CPI YoY | - | - | EUR / 08:00 |
| SW 4Q GDP QoQ | - | 0.30% | SEK / 08:30 |
| SW 4Q GDP WDA YoY | - | 2.10% | SEK / 08:30 |
| SW Jan PPI YoY | - | -0.10% | SEK / 08:30 |
| SW Jan PPI MoM | - | -0.30% | SEK / 08:30 |
| SW Jan Retail Sales MoM | - | -0.60% | SEK / 08:30 |
| SW Jan Retail Sales NSA YoY | - | 3.40% | SEK / 08:30 |
| NO Jan Retail Sales W/Auto Fuel MoM | - | 0.20% | NOK / 09:00 |
| NO 4Q Manufacturing Wage Index QoQ | - | 1.90% | NOK / 09:00 |
| NO Feb Unemployment Rate | - | 3.10% | NOK / 09:00 |
| NO Mar Norges Bank Daily FX Purchases | - | -700M | NOK / 09:00 |
| GE Feb CPI Brandenburg MoM | - | -1.20% | EUR / 09:00 |
| GE Feb CPI Brandenburg YoY | - | -0.60% | EUR / 09:00 |
| GE Feb CPI Hesse MoM | - | -1.00% | EUR / 09:00 |
| GE Feb CPI Hesse YoY | - | -0.60% | EUR / 09:00 |
| GE Feb CPI Bavaria MoM | - | -1.00% | EUR / 09:00 |
| GE Feb CPI Bavaria YoY | - | -0.20% | EUR / 09:00 |
| SP Dec Current Account Balance | - | 1.7B | EUR / 09:00 |
| UK 4Q P GDP QoQ | - | 0.50% | GBP / 09:30 |
| UK 4Q P GDP YoY | - | 2.70% | GBP / 09:30 |
| UK 4Q P Total Business Investment QoQ | - | -1.40% | GBP / 09:30 |
| UK 4Q P Total Business Investment YoY | - | 5.20% | GBP / 09:30 |
| UK 4Q P Private Consumption QoQ | - | 0.80% | GBP / 09:30 |
| UK 4Q P Government Spending QoQ | - | 1.10% | GBP / 09:30 |
| UK 4Q P Gross Fixed Capital Formation QoQ | - | 1.00% | GBP / 09:30 |
| UK 4Q P Exports QoQ | - | -0.40% | GBP / 09:30 |
| UK 4Q P Imports QoQ | - | 1.40% | GBP / 09:30 |
| UK Dec Index of Services MoM | - | 0.10% | GBP / 09:30 |
| UK Dec Index of Services 3M/3M | - | 0.80% | GBP / 09:30 |
| UK Feb Lloyds Business Barometer | - | 49 | GBP / 09:30 |
| GE Feb CPI North Rhine Westphalia MoM | - | -1.00% | EUR / 09:30 |
| GE Feb CPI North Rhine Westphalia YoY | - | -0.40% | EUR / 09:30 |
| IT Feb P CPI NIC incl. tobacco MoM | - | -0.40% | EUR / 10:00 |
| IT Feb P CPI NIC incl. tobacco YoY | - | -0.60% | EUR / 10:00 |
| IT Feb P CPI EU Harmonized MoM | - | -2.40% | EUR / 10:00 |
| IT Feb P CPI EU Harmonized YoY | - | - | EUR / 10:00 |
| GE Feb P CPI YoY | - | -0.40% | EUR / 13:00 |
| GE Feb P CPI EU Harmonized MoM | - | -1.30% | EUR / 13:00 |
| GE Feb P CPI EU Harmonized YoY | - | -0.50% | EUR / 13:00 |
| US 4Q S GDP Annualized QoQ | - | 2.60% | USD / 13:30 |
| US 4Q S Personal Consumption | - | 4.30% | USD / 13:30 |
| US 4Q S GDP Price Index | - | 0.00% | USD / 13:30 |
| US 4Q S Core PCE QoQ | - | 1.10% | USD / 13:30 |
| US Feb ISM Milwaukee | - | 51.6 | USD / 14:00 |
| US Feb Chicago Purchasing Manager | - | 59.4 | USD / 14:45 |
| US Jan Pending Home Sales MoM | - | -3.70% | USD / 15:00 |
| US Jan Pending Home Sales NSA YoY | - | 8.50% | USD / 15:00 |
| US Feb F U. of Mich. Sentiment | - | - | USD / 15:00 |
| US Feb F U. of Mich. Current Conditions | - | - | USD / 15:00 |
| US Feb F U. of Mich. Expectations | - | - | USD / 15:00 |
| US Feb F U. of Mich. 1 Yr Inflation | - | - | USD / 15:00 |
| US Feb F U. of Mich. 5-10 Yr Inflation | - | - | USD / 15:00 |
| GE Jan Retail Sales MoM | - | 0.20% | EUR / 23:00 |
| GE Jan Retail Sales YoY | - | 4.00% | EUR / 23:00 |
Currency Tech
EUR/USD
R 2: 1.1534
R 1: 1.1450
CURRENT: 1.1330
S 1: 1.1262
S 2: 1.1098
GBP/USD
R 2: 1.5826
R 1: 1.5620
CURRENT: 1.5393
S 1: 1.5317
S 2: 1.5197
USD/JPY
R 2: 121.85
R 1: 120.48
CURRENT: 118.64
S 1: 118.18
S 2: 116.66
USD/CHF
R 2: 0.9831
R 1: 0.9554
CURRENT: 0.9521
S 1: 0.9374
S 2: 0.9284