FX Market Update 14-2

Market Briefs 

  • EUR/USD +0.2%, USD/JPY -0.3%, GBP/USD -0.5%, DXY -0.1%,
  • DAX +0.1%, Brent +0.9%, Gold +0.3%, Copper +0.6%
  • Copper firmer after hefty overnight gains on supply woes – Rtrs
  • China iron ore extends gains to 3-year high, upbeat steel outlook – Rtrs
  • Britain unlikely to trigger Article 50 at March EU summit-Brexit minister – Rtrs
  • Pressure mounts on France’s Fillon as party lawmakers rebel – Rtrs
  • BoJ Gov Kuroda – Global yield rises alone won’t trigger rate hikes
  • EZ Q4 GDP flash est 0.4% m/m, 1.7% y/y vs prev 0.5%/1.8%. 0.5%/1.8% f/c
  • EZ Dec Ind production -1.6% m/m, 2.0% y/y vs prev 1.5%/3.2%. -1.5%/1.7% f/c
  • GB Jan CPI -0.5% m/m, 1.8% y/y vs prev 0.5%/1.6%. -0.5%/1.9% f/c
  • GB Jan PPI core output +0.5% m/m, +2.4% y/y vs prev 0.0%/2.1%. 0.3%/2.2% f/c
  • DE Jan CPI final -0.6% m/m, 1.9% y/y vs prev -0.6%/1.9%. -0.6%/1.9% f/c
  • DE Q4 GDP flash SA 0.4% q/q vs prev 0.1% rvsd. 0.5% f/c
  • CH Jan CPI 0.0% m/m, 0.3% y/y vs prev -0.1%/0.0% rvsd. 0.3% f/c
  • CH Jan Producer/Import price 0.4% m/m, 0.8% y/y vs prev 0.2%/0.0%


Looking Ahead – Economic Data (GMT)

  • 13:30  PPI Final Demand (Jan) mkt +0.3% m/m, 1.5% y/y; prev +0.2% m/m, +1.6% y/y
  • 13:30  — PPI Final Demand ex-Food and Energy (Jan) mkt +0.2% m/m, +1.1% y/y; prev +0.1% m/m, +1.6% y/y
  • 13:55  Redbook Same-Store Sales Index (weekly)  prev +0.7% y/y


Looking Ahead – Events, Other Releases (GMT)

  • 13:30 Richmond Fed Lacker speaks at U.Delaware forum, Newark, DE
  • 15:00 FOMC Chair Yellen semi-annual Senate testimony, Washington, DC
  • 18:00 Dallas Fed Kaplan at Houston luncheon
  • 18:15 Atlanta Fed Lockhart speaks in Huntsville, AL

Currency Summaries

EUR/USD

  • Asia range 1.0592-1.0624. Repelled by hrly cloud base 1.0634 early London
  • Support 1.0584 – 50% of 1.0340-1.0829. Daily cloud base 1.0565
  • Bids touted 1.0590-80, stops 1.0540. Closed sub 55DMA 1.0604 Mon – bearish
  • Awaiting Yellen, any mention of live March/3 hikes 2017 and d/side vulnerable
  • Overnight implied vol break evens pricing a mere 55 pips however
  • Yields and DXY steady – latter well within Mons 100.58-101.11 range
  • No reaction to ZEW, EU political risk more of a concern – French polls watched
  • 3mth implied vols sharply higher since capturing French election result

USD/JPY

  • Japanese exporters to 114.00 and importers down to 113.00 contain
  • U.S yields slip from Mon’s high: 2s @ 1.2059: Chart:
  • 1.1bln 113.50 expiry today and 4.5bln 114’s today/Wed
  • EUR/JPY weakest of crosses, through s-t supports, 120.68 to 120.23
  • BoJ Gov Kuroda – Global yield rises alone won’t trigger rate hikes
  • USD/JPY capped by 30DMA @ 114.04 and 112.86 10DMA below
  • Hourly cloud contains European action: 113.20-113.61

USD/CHF

  • USD/CHF failed to sustain gains above kijun-sen at 1.0055
  • Softer dollar & failure to close above the line last 2 sessions taking its toll
  • Pullback low at 1.0032 but holds above 100-DMA at 1.0017
  • EUR/CHF 1.0675-1.0660 in Europe as tight range play persists
  • Makes lower day highs-rally attempts ltd ahead of last wk’s 1.0685 peak

GBP/USD

  • GBP/USD fell three-quarters-of-a-cent to threaten 1.2440 on sub-f/c UK CPI data
  • Up 1.8% vs +1.9% f/c. Core CPI & RPI sub-f/c too (4.30am ET). 1.2440 = Feb 10 low
  • 1.2515 was pre-UK inflation data low vs 1.2548 late Asia high after Flynn exit news
  • EUR/GBP rose nearly half-a-penny to threaten 0.8528 on sub-f/c UK CPI data
  • 0.8528 = 76.4% of 0.8550-0.8457 & 38.2% of 0.8644-0.8457. 0.8457 = 6wk low Monday

USD/CAD

  • USD/CAD is trading within strike of a large 1.3050 option expiry for the NY cut
  • $1.275bln strike. 1.3039-1.3057 was European am range. 1.3055 = Monday low
  • Monday low plumbed after CAD boosted by positive Trump/Trudeau meeting
  • Bids expected near 1.3000 (1.3008 was last week’s low, Feb 6)

AUD/USD

  • AUD/USD extended north from 0.7637 to threaten 0.7689 during the European am
  • 0.7637 = Asia low. 0.7689 was last Friday’s high. 0.7688 was Monday’s high
  • Offers tipped ahead of 0.77 option barrier level, stops tipped above 0.7700/05

NZD/USD

  • NZD/USD met headwind pre-0.72 after firming from 0.7169 (Asia low)
  • More offers tipped ahead of 0.7219 (Monday’s high)
  • AUD/NZD is consolidating recent gains at 3mth highs just under 1.07

FX OPTIONS

  • Market awaits Yellen, Break evens for o/n vols not excessive
  • EUR pricing 55 pips and USD/JPY 85 pips in to the event
  • USD/JPY 1wk-1mth vols new lows for 2017 as 113 handle holds
  • Big JPY expiries 113-114 today/Wed. EUR/USD curve steady
  • 3mth well inflated since capturing French elections last Wed
  • AUD curve extends 2yr lows. Hit on CNH vols today
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