FX market Update 25-1

Market Briefs 

  • USD/JPY -0.2%, GBP/USD +0.4%, EUR/USD +0.2%
  • DXY -0.3%, DAX +1.0%, Brent -0.7%, Gold -0.5%
  • Germany BDI: sees $ surging by 5-10% against manjor world currencies this year – Rtrs
  • Buba Dombtret: Given current infl data, prob have to live with low int rate until further notice – Rtrs
  • BoE Salmon: Expects further flash crashes in core global markets – Rtrs
  • ECB Lautenschlaeger: Should soon start discussing exit from stimulus – Rtrs
  • DE Jan IFO Business Climate Index 109.8 vs prev 111.0. 111.3 exp
  • DE Jan IFO Current Conditions Index 116.9 vs prev 116.7 rvsd. 116.9 exp
  • CH Dec UBS Consumption Indicator 1.50 vs prev 1.45 rvsd
  • CH Jan ZEW Investor Sentiment 18.5 vs prev 12.9
  • GB Jan CBI Manuf Orders +15 vs prev 0. +2 exp. Highest since Apr 2015

Looking Ahead – Economic Data (GMT)

  • 12:00  MBA Weekly Mortgage Application Indices
  • 14:00  FHFA Home Price Index (Nov) prev +6.2% y/y
  • 15:30  EIA Weekly Petroleum Status Report

Looking Ahead – Events, Other Releases (GMT)

  • 19:30  FedTrade operation 30-yr Fannie Mae/Freddie Mac (max $1.725 bn)


Currency Summaries

EUR/USD

  • EUR/USD slightly higher in Europe alongside higher bund yields
  • Europe range 1.0711-55 vs Asia’s 1.0711-38. both under NA peak 1.0775
  • 10 year bund yield matched Dec 2016 high of 0.45%
  • German IFO ignored.  Fell to 109.8 in Jan from 111.0 and vs 111.3 f/c
  • Few expiries today EUR 750mln 1.0700-50
  • Daily cloud & 100-DMA key above:

USD/JPY

  • Standing 114.00 offers should offers supply. Daily tenkan comes in @114.07
  • Thickening cloud spans 109.93-114.97, hurting nr-term bulls
  • 1.8 yards worth of 114.00 strikes set to expire at the NY cut on Thu
  • Tokyo saw a push very early to 113.99 on Gotobi fix demand
  • Market subsequently fell to 113.37 on continuing concerns over Trump

USD/CHF

  • USD/CHF pivots 1.00, cannot sustain gains above. 1.0026 high
  • EUR/CHF bid, the cross has pulled away fm the 1.07 SNB perceived base
  • CB likely bids there and below. Buying also seen in 1.0725/35 region
  • Sucession of higher daily lows on the charts. 1.0750 Tues, 1.0745 today
  • Tech resistance at 1.0754 (30-DMA Bolli top)

GBP/USD

  • GBP/USD scaled a 6wk peak 2 pips shy of 1.26 after tripping stops above 1.2550
  • Offers pre-1.2550 kept lid on cable Tuesday (1.2541 = Asia high). 1.2491  early Ldn low
  • EUR/GBP fell to 0.8530 during the European am as more GBP shorts were jettisoned
  • 0.8530 = 20-day low. 0.8579 was early Europe high. 0.8650 was Tuesday high

USD/CAD

  • USD/CAD elicited support at 1.3118 after sliding from 1.3160 (European am high)
  • 1.3118 = 200DMA. 1.3106 = Tuesday low/76.4% of 1.3019-1.3388
  • Large 1.3185 option expiry for NY cut, $1.4bln strike

AUD/USD

  • AUD/USD extended south to 0.7515 early Europe as sub-f/c Oz CPI digested
  • 0.7515 = six-day low. 0.7597 was Asia high, pre-Australian CPI data
  • 0.7552 = rally high from 0.7515. 0.7550 option expiry for NY cut, A$337mn strike
  • AUD/NZD extended south to a 3wk low of 1.0383 during the European am
  • 1.0471 was Asia high, before Australian CPI data. 1.0408 = Asia low

NZD/USD

  • NZD/USD revisited 0.7261 (Asia high) after rising from 0.7225 (European am low)
  • 0.7276 = 11wk high Tuesday. NZ Q4 CPI data due 4.45pm ET, f/c +1.2% y/y

FX OPTIONS

  • Implied and realised vols heavy/lower as spot markets consolidate
  • Impending China NY holidays don’t help, Minimal data risk until BoJ/FOMC
  • EUR/USD 1mth vol lowest since Nov at 8.1 and 0.9 below daily realised vol
  • Cable vols hit hard since UK PM Brexit speech and Article 50 – suggest value now
  • Even USD/JPY vols falling as recent intraday spot volatility slows
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