Overview
Greece very much took centre stage at the start of the week in the midst of the victory for Syriza leader Tsipras which subsequently saw EUR start the week off on the backfoot and break below the 1.1100 level for the first time since 2003. Nonetheless this was relatively short-lived with the multi-bloc currency supported by EUR/CHF with the SNB said to be intervening in FX markets in order to prop up their domestic currency with some analysts suggesting that 1.05 is the level the SNB would be comfortable with; a level the cross hit in the latter stages of the week.
The main key risk event this week was that of the latest FOMC meeting which wasn’t the market-mover that some had hoped for. The release saw the Fed reiterate they would be “patient” when the time comes to hike rates but completely dropped their “considerable time” pledge. Other notable comments were that they expected inflation to drop further while the state of the economy was expanding at a “solid” pace, from previous “moderate”. Overall the release took a relatively hawkish bias and saw some modest USD strength but nothing too pertinent.
One of the largest movers throughout the week was the antipodeans with the AUD shrugging off the better than expected Australian CPI reports in the wake of an article by RBA watcher Terry McCrann which said the RBA will almost certainly cut rates at the February meeting. This subsequently saw markets price in a 67% chance of action by the RBA next week, up from the 7% following the CPI release, despite an additional article from McCrann later in the week which saw the commentator say he could not be certain over RBA action. This saw some modest strength for the AUD although was not enough to fully erase the week’s losses. Furthermore in the antipodean complex, following the recent action from the BoC, the RBNZ was forced to abandon their tightening bias, while adding they expected a further depreciation in the NZD.
Looking ahead to next week, the main key risk event will be that of the Nonfarm payrolls report which is expected to show another solid reading of 233k albeit below the previous 252k. Elsewhere, central banks will once again take focus with the aforementioned RBA rate decision due to be made and there also potentially being an emergency Turkish rate decision in lieu of the recent criticism by the Turkish government of the recent decision by the central bank to cut their key rate by just 50bps.