Yesterday’s action was rather typical of a Monday over the last year, with EURUSD having another three-day weekend on a 36-pip trading range. The action elsewhere was lacklustre as well, though the news out of China over the weekend was just enough to corral the recent AUDUSD breakout attempt higher. But the reversal is so far incomplete as it feels like the market is simply unwilling to commit to a direction at almost every turn, with a distinct failure of new themes emerging.
Overnight, the Bank of Japan maintained it current policy course and monetary base target once again as the focus remains on the effects on growth of the coming 3 percent sales tax hike on April 1. USDJPY moved in a 25-pip range as there was little anticipation heading into this meeting. We’ll have to see at least the April data, and possibly May data as well before the Bank of Japan starts to rattle its cage once again.
The AUD was surprisingly resilient overnight given the a disappointing set of the latest NAB results, as conditions survey dropped particularly sharply to the lowest level in three months.
New Zealand’s Finance Minister said that interest rate hikes are “inevitable”. New Zealand’s 2-year rate has pushed close to 4.00 percent recently (highest since the beginning of 2011) as the Reserve Bank of New Zealand (RBNZ) is the only bank expected to hike rates aggressively over the coming year. I suspect the rate path is over-anticipated and the kiwi is priced for perfection, but there are few signs of weakness just yet, so let’s see how the market responds to the RBNZ OCR rate announcement tomorrow evening (Thursday in NZ).
Looking ahead
We’ve got uninspiring price action and an uninspiring calendar on tap for today, but let’s hope the market can surprise us with something interesting. Key questions for today included whether GBPUSD breaks down further (1.6585 is last local support) after yesterday’s meltdown or makes a stand within the range. Note that the UK calendar is the most active in the European session today. Also note the Swedish CPI data release this morning, as Scandies have been very responsive to incoming data. EURSEK looks technically bearish, but important support is coming up in the form of the 200-day moving average, which has persistently held for close to a year now.
Chart: GBPUSD
Sterling crosses are in focus today with Bank of England (BoE) officials out speaking and with January production data on tap. The Bloomberg consensus is looking for a robust expansion of Manufacturing Production from last year after slightly disappointing data for December. Sterling has been weak over the last couple of days and it looks like today will be the day that tells us whether the currency can make a stand or will fall deeper back into the old range against the greenback, which is a distinct threat with any close down well below 1.6600 today.
Also today, let’s see whether the AUDUSD rally is rejuvenated with a rally back toward 0.9100 or administered the coup de grace with a close well below 0.9000 — we may not get an answer on that front until Thursday’s Australian employment report.
For EURUSD, it’s likely a day of testing where (or is it whether?) support comes in below yesterday’s lows as the pair takes aim at that six and a half-year low in daily volatility that was set last week.
Economic Data Highlights
- New Zealand Feb. REINZ House Price Index rose 2.1% MoM
- New Zealand Feb. REINZ House Sales fell -7.6% YoY
- UK Feb. BRC Sales Like-for-like out at -1.0% YoY vs. +1.8% expected and +3.9% in Jan.
- Australia Feb. NAB Business Confidence out at 7 vs. 9 in Jan.
- Australia Feb. NAB Business Conditions out at 0 vs. 5 in Jan.
- Japan Bank of Japan left Monetary Base Target unchanged at ¥270T as expected
- Germany Jan. Trade Balance out at +15.0B as expected and vs. +13.9B in Dec.
- Germany Jan. Current Account Balance out at +16.2B vs. +15.3B expected and +21.1B in Dec.
Upcoming Economic Calendar Highlights (all times GMT)
- Sweden Feb. CPI (08:30)
- UK Bank of England’s Carney, Fisher and others to speak at parliamentary hearing on BoE’s inflation report (09:30)
- UK Jan. Industrial and Manufacturing Production (09:30)
- US Feb. NFIB Small Business Optimism (11:30)
- Norway Norges Bank’s Olsen out Speaking (14:00)
- UK Feb. NIESR GDP Estimate (15:00)
- Australia Mar. Westpac Consumer Confidence (23:30)
- Japan Feb. Domestic Corporate Goods Price Index (23:50)
- Australia Jan. Home Loans (00:30)
- Japan Feb. Consumer Confidence Index (05:00)