FX Daily Planet: Sydney/Asia Open

FX Daily Planet: Sydney/Asia Open

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View for the day
Today featured another quiet session in New York, with US equities about flat in afternoon trading and the USD slipping slightly against the majors. GBP remains today’s the strongest performer during the session following the Bank of England quarterly inflation attitudes survey which showed a rise in consumers’ inflation expectations over the coming year. Conversely, NZD continues to under-perform, likely still fallout from the RBNZ meeting. Earlier, we received today’s quarterly policy meeting and statement from the SNB has proved to be a non-event. There was no change to interest rates, no change to the language around FX (SNB to counter excessive CHF appreciation decisively) and no change to the assessment that monetary policy needs to be tightened eventually to ensure medium-term price stability. Today’s commentary also featured upgrades to the growth and inflation forecasts, with an increase in the GDP and inflation forecast. All in all, the forecasts and commentary are consistent with the SNB moving to gradually normalize policy, which we expect will occur in the Q3. The initial reaction was a move lower in CHF, but that currency has fully reversed that move and is currently trading up slightly against the USD. Separately, the Norges Bank has published its Regional Networks Survey which is an important input into the decision making of the Norges Bank. In summary, the regional network is expecting growth to continue to pick up over the next six months. Notably, for the first time since spring 08, contacts expect investment spending to pick up over the next 12 months. Furthermore and the key for the Norges Bank is the fact that contacts expect a more rapid rise in prices over the coming year.

The 30-year Treasury auction yielded 4.679%, better than forecast with a bid/cover of 2.89, all strong results helping the long end to rally post auction. In contrast, yields continue to move higher in shorter maturities. 2-4y yields for example are all higher by around 4bp on the day. In economic news, today’s jobless claims report came in at 462k, near expectations. Claims continue to languish in their recent elevated range and recent data certainly provide an offset to the better-than-expected February labor market report. These results indicate that improvements in labor markets are slow indeed. Elsewhere, the trade balance came in at -37.3bn, a slight narrowing from -40.2bn last month due mainly to smallish declines in both exports and larger declines in imports for the month. Tomorrow will feature retail sales in New Zealand and the final release of Japan IP.
Overnight news
USD: 30y Treasury auction yielded 4.679% with a bid/cover of 2.89. A strong results
CAD: Jan trade balance came in at 0.8bn CAD (JPM: 0.1, Cons: 0.2)
USD: Mar. 6th initial jobless claims came in at 462k (JPM: 460, Cons: 460); trade balance was -37.3bn USD (JPM: -43.0, Cons: -41.0)
CHF: SNB rate announcement: There was no change to interest rates, no change to the language around FX (SNB to counter excessive CHF appreciation decisively) and no change to the assessment that monetary policy needs to be tightened eventually to ensure medium-term price stability.
SEK: Swedish headline inflation is stronger than expected, rising 1.2% y/y. Retail sales are revised lower for January to 3.3% m/m
GBP: Bank of England quarterly inflation attitudes survey showed a rise in consumers’ inflation expectations over the coming year from 2.4% to 2.5%.
Today’s watchlist (all times GMT; +11hrs for Sydney, +9hrs for Tokyo, -5hrs for New York)
NZD: Jan retail sales (%m/m, sa)@21:45 (JPM: 0.2, Cons: 0.5)
JPY: IP final (%m/m, sa) @ 04:30
Overnight price action
FX: The USD generally weakened against the majors; GBP remains higher.
FX vol: GBP, AUD and NZD 1-mth vol are lower by 0.3-0.4%
Commodities: Oil and gold are both about flat on the day.
Bonds: The long end rallied post auction, currently about flat on the day. In contrast, yields continue to move higher in shorter maturities. 2-4y yields for example are all higher by around 4bp on the day.
Equities: US equities are about flat.
Technical View for the day
The short term range bias for the USD continued yesterday while maintaining the mixed tone. As such, the recent themes remain intact and key levels stay well-defined. In turn, the medium trends should prevail pointing to additional USD strength. In that regard, the European currencies still look vulnerable to further weakness given the corrective bias to the recent price action. We continue to see an important test for the commodity currencies as several USD pairs are approaching critical levels with breaks suggesting an increased risk of a trending environment. The action in USD/CAD is a key focus with prices testing the important medium term range lows near 1.0205/1.0235. As mentioned of late, the near term setup suggests some pause/bounce is likely, but we see a higher risk that prices eventually break down. Similarly, both AUD/USD and NZD/USD face important tests at short term resistance levels which should define whether an extension of the recent trends can develop. The .9175/.9200 area for AUD/USD and 7085/.7155 levels for NZD/USD will define whether a deeper retracement of the decline from the January peak is underway. Note that AUD/NZD remains in position for additional upside as this week’s low has thus far held the key 1.29 breakout area. JPY remains at risk of additional underperformance as both USD/JPY and the crosses are attempting to sustain through key levels. Again, the focus remains on the key 90.65/70 area for USD/JPY. The short term risks argue for additional upside after this week’s lows held Friday’s breakout levels. This would allow for a closer test of the 91.45/90 area which includes the 200-day moving average and the January channel high. Similarly, the action in the crosses stays constructive highlighted by yesterday’s break of the key 82.82 late-February high for AUD/JPY, as well as the attempt to push through the 88.45 area for CAD/JPY.

ENDS

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