Market Brief
FX markets were basically unchanged with slight USD weakness after Fed Chair Yellen wrapped up her semi-annual testimony. Asia regional equity indices were mixed. The Nikkei rose 1.08%, the Hang Seng index was up 0.38% and the Shanghai composite index climbed 2.15%. ASX and Taiwan were both marginally lower. In the forex markets, the major were range bound, with broadbased liquidation of USD longs. EUR/USD edge up on the dovish Yellen comments to 1.1375. However, demand was thin and focus will be on 1.1330 to 1.1390 range. With risk from Greek having subsided we anticipate EUR/USD to weaken on divergent monetary policy paths. Australia’s private capital expenditure Q4 2014 collapsed -2.2% against expected -1.6%. The weak CAPEX pushed AUD/USD down to 0.7837 before bargain hunters pushed the pair marginal higher to 0.7855. Expectations for a RBA OCR rate cut at next week meeting spiked from 40% to 52%. AUD/USD focus will be on channel support at 0.7620 as a dovish Fed clear the way for the RBA to cut further. New Zealand’s trade surplus increased to NZ$56mn in January against a market expected deficit of NZ$158mn. New Zealand January’s imports fell to NZ$3.64bn while exports decreased to NZ$3.70bn. Solid trade data help NZD/USD recovery off the session lows at 0.7550 but unable to clear stop heavy 0.7577 barrier.
In BoJ Governor Kurodas testimony to the Diet never shifted from his traditional line. He stated that prices will continued to rise and would adjust policy as necessary. Kuroda went on to say that QQE policy was not to target FX prices but focused on price stability. It seems to suggest that recent comments addressing potentially shifting the inflation target might lack critical board support. In addition, a report in the WSJ suggest that Japanese PM Abe would guide the balance of the BoJ board if necessary. This suggests that when dissenter Morimoto term expires in June another reflationist would be appointed to the BoJ’s Policy Board. For most of the Asian session, JPY was weaker across the board as the USD/JPY rallied to 119.10 (aided by closed stressed shorts). We anticipated a sideways range 118.64 to 119.09 for now while markets absorb Yellens comments, the Greek bailout agreement and escalation in Ukraine – Russian tensions.
As expected in what is political theater Fed Chair Janet Yellen scuffled with Republican lawmakers over the need for additional oversight on the Central Bank. Yellen outright rejected accusations that the Fed is unaccountable and closely aligned with the White house and Democrats. Scott Garrett, a New Jersey Republican who has introduced bill to give congress more control of Fed and curb its power, made plenty of headlines grabbing comments. Yet Yellen was able to gracefully spar with the young turk calling it a “complete mis-characterization.”
Today, traders will be watching Spanish Final GDP, EA M3 and euro area confidence. In the UK, GDP growth is expected to come in at 0.5% q/q in Q4, falling from 0.7% q/q in Q3 and BoE Deputy Governor Shafik is also due to speak. In the US, CPI and Durable Good Order data are expected. Market anticapate CPI should see a monthly drop in headline inflation to -0.6%, while the focus will be on Core CPI (given Fed comments and last month drop) expected to easing to 0.1%, which would hold steady at yearly data at 1.6%. Fed Chair Yellen’s testimony should cap USD upside till next week’s US payroll report.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| SP 4Q F GDP YoY | - | 2.00% | EUR / 08:00 |
| SP Dec Total Mortgage Lending YoY | - | 16.80% | EUR / 08:00 |
| SP Dec House Mortgage Approvals YoY | - | 14.20% | EUR / 08:00 |
| SW Jan Trade Balance | - | 0.4B | SEK / 08:30 |
| SW Jan Household Lending YoY | - | 6.10% | SEK / 08:30 |
| GE Feb Unemployment Change (000's) | - | -9K | EUR / 08:55 |
| GE Feb Unemployment Rate | - | 6.50% | EUR / 08:55 |
| EC Jan M3 Money Supply YoY | - | 3.60% | EUR / 09:00 |
| EC Jan M3 3-month average | - | 3.10% | EUR / 09:00 |
| IT Dec Retail Sales MoM | - | 0.10% | EUR / 09:00 |
| IT Dec Retail Sales YoY | - | -2.30% | EUR / 09:00 |
| IT Feb Consumer Confidence Index | - | 104 | EUR / 10:00 |
| IT Feb Business Confidence | - | 97.1 | EUR / 10:00 |
| IT Feb Economic Sentiment | - | 91.6 | EUR / 10:00 |
| EC Feb Business Climate Indicator | - | 0.16 | EUR / 10:00 |
| EC Feb Industrial Confidence | - | -5 | EUR / 10:00 |
| EC Feb F Consumer Confidence | - | - | EUR / 10:00 |
| EC Feb Economic Confidence | - | 101.2 | EUR / 10:00 |
| EC Feb Services Confidence | - | 4.8 | EUR / 10:00 |
| IT Jan Hourly Wages MoM | - | 0.00% | EUR / 11:00 |
| IT Jan Hourly Wages YoY | - | 1.10% | EUR / 11:00 |
| CA Jan CPI NSA MoM | - | -0.70% | CAD / 13:30 |
| US Jan CPI MoM | - | -0.40% | USD / 13:30 |
| CA Jan CPI YoY | - | 1.50% | CAD / 13:30 |
| US Jan CPI Ex Food and Energy MoM | - | 0.00% | USD / 13:30 |
| CA Jan CPI Core MoM | - | -0.30% | CAD / 13:30 |
| US Jan CPI YoY | - | 0.80% | USD / 13:30 |
| CA Jan CPI Core YoY | - | 2.20% | CAD / 13:30 |
| US Jan CPI Ex Food and Energy YoY | - | 1.60% | USD / 13:30 |
| CA Jan CPI SA MoM | - | -0.10% | CAD / 13:30 |
| US Jan CPI Index NSA | - | 234.812 | USD / 13:30 |
| CA Jan CPI Core SA MoM | - | 0.20% | CAD / 13:30 |
| US Jan CPI Core Index SA | - | 239.339 | USD / 13:30 |
| CA Jan Consumer Price Index | - | 124.5 | CAD / 13:30 |
| US Jan Durable Goods Orders | - | -3.40% | USD / 13:30 |
| US Jan Durables Ex Transportation | - | -0.80% | USD / 13:30 |
| US Jan Cap Goods Orders Nondef Ex Air | - | -0.60% | USD / 13:30 |
| US Jan Cap Goods Ship Nondef Ex Air | - | -0.20% | USD / 13:30 |
| US 21.févr. Initial Jobless Claims | - | - | USD / 13:30 |
| US 14.févr. Continuing Claims | - | - | USD / 13:30 |
| US 4Q House Price Purchase Index QoQ | - | 0.90% | USD / 14:00 |
| US Feb Kansas City Fed Manf. Activity | - | 3 | USD / 16:00 |
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