FX Daily Planet: London Open

FX Daily Planet: London Open

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View for the day

Although Asian equity markets continued to rally, G-10 currencies stayed in tight ranges. CAD, which was a star performer on Tuesday, continued to strengthen while SEK and EUR underperformed the most. But the extent of these moves was quite small at -0.2% to +0.2% against USD. Meanwhile, USD/Asia traded lower amid a broad rally in regional stocks with KRW outperformance (+0.9% against USD) standing out.

In the London session, March job data from the UK and MPC minutes for the meeting held early this month will be in focus. We expect the minutes to reveal a 9-0 vote for keeping monetary policy unchanged. As CPI overshoot the upper limit of the BoE’s target at 3%oya twice this year, there seems to be speculation that the MPC has been less committed to meeting its inflation target reflecting political or other pressures to adopt a more reflationary bias. Although we do not agree with such views, any dovish commentaries from the minutes could heighten the speculation further and affect GBP negatively.

Interestingly, although the situation in Greece has deteriorated further this week, the market has largely ignored it; DAX rallied 13% this week and almost offset last Friday’s loss driven by the news on fraud by the US financial institution. Therefore, regarding the impact on investors’ risk appetite, which is the key determinant of the market at this time, a series of earnings reports by the US corporates should be more important than Greek headlines. If strong results from the earnings reports continue to boost equities, it should support high beta FX at the cost of USD and JPY.

Overnight news

JPY: BoJ Deputy Governor Nishimura said, “Some beams of light are starting to break through a thick cloud of deflation” and “The effects of the pickup in the economy since the spring of 2009 can be considered to spread over to prices only from now on.”

AUD: February Westpac leading index at 0.5%m/m and previous month revised to 0.4%.

US earnings: Apple 1Q earnings $3.33 vs $2.46 estimte; Yahoo! 1Q earnings $0.22 vs $0.09 estimate

Today’s watchlist (all times BST; +9hrs for Sydney, +8hrs for Tokyo, -5hrs for New York)

THB: BoT rate announcement @8:30 (JPM: 1.50, Cons: 1.25)

GBP: BoE releases MPC minutes for Apr. 7-8th meeting @9:30; Mar claimant count (000’s ch, m/m, sa) @9:30 (JPM: -15, Cons: -10); Feb average weekly earnings (3mma, %oya, sa) @9:30 (JPM: 2.4, Cons: 2.4); Mar unemployment rate (%, sa) @9:30 (JPM: 4.9, Cons: 4.9)

EUR: Portugal to auction EUR0.5bn 9-months bills @10:50; Portugal to auction EUR0.5bn 3-months bills @10:50; German Finance Minister Schaeuble speaks to German lawmakers on the Greek crisis

USD: Boeing for 1Q @12 :30 (JPM : 0.600, Cons : 0.768); Morgan Stanley for 1Q @13 :00 (Cons : 0.576); Wells Fargo for 1Q @13 :00 (JPM : 0.430, Cons : 0.427); AT&T for 1Q @13 :00 (JPM : 0.560, Cons : 0.547); McDonalds for 1Q @Bef-Mkt (JPM : 0.960, Cons : 0.961); eBay for 1Q @Aft-Mkt (JPM : 0.410, Cons : 0.409);

Overnight price action

FX: G-10 currencies trading in tight ranges; CAD continued to outperform rising 0.2% whilst SEK underperformed falling 0.2% all against USD.

FX vol: vols under pressure in USD/JPY and JPY crosses, falling only slightly by 0.1-0.2vols.

Commodities: oil up 1.1% to $84.4/barrel; gold up 0.3% to $1138.6/oz.

Bonds: JGB yields broadly unchanged; 10yr yield up 1-2bp.

Equities: Asian equities rallied with the Nikkei and the Kospi rising 1-1.5% and the Shanghai rising 0.7%.

Technical View for the day

The two day risk consolidation seems to have found a quick end yesterday when the optimists returned to take over control again. Positive fundamental data out of Germany provided the appropriate dressing and with air-traffic being picked up again there was nothing much left to spoil the positive sentiment. In terms of structures the increased danger of entering a broader risk consolidation persists though as long as the S&P500 has not broken a strong resistance cluster at 1215/22/29. The latest risk recovery and hawkish comments of the BOC have particularly supported CAD but unless key-supports at 1.3290/75 in EUR/CAD, at 0.9820-0.9711 in USD/CAD or at 1.5256 in GBP/CAD is taken out the immense consolidation risk persists. On the back of improved risk appetite the JPY retreated again but hasn’t given any indication yet whether this is just a temporary setback or part of a broader JPY depreciation Key-levels to watch in this respect are at 126.63 in EUR/JPY and at 94.04/28 in USD/JPY. As for EUR/USD the market is still trading heavy and would need to clear a resistance zone between 1.3516/45 and 1.3644 to gain some up-momentum. A break below 1.3379 would on the other hand indicate acceleration down with 1.3093/81 and 1.2881 being the next targets in focus.

ENDS

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