Monday 12th January: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite declined 2 %, Hang Seng gained 0.20 %, ASX lost 0.80 %
• Commodities: Gold at $1230 (+1.20 %), Silver at $16.65 (+1.40 %), WTI Oil at $47.56 (-1.60 %), Brent Oil at $50.60 (-1.30 %)
• Rates: US 10 year yield at 1.95, UK 10 year yield at 1.597, German 10 year yield at 0.485

News & Data:

• Australia Home Loans -0.7 %, Expected: 2.0 %, Previous: 0.2 %
• Handelsblatt reports: Clear ECB majority behind sovereign purchases
• Japan’s Finance Minister Taro Aso expects the country to halve primary balance deficit in FY 15
• Japan’s Prime Minister Shinzo Abe says that FY 2015 budget to revive economy, rebuild finances
• Oil Producers Betting on Price Drop With OPEC Not Curbing Output (BBG)
• Dollar Slips on Wages as Oil Drops; Chinese Stocks Drop (BBG)

CFTC Positioning:

• EUR net short 161K vs net short 152K prior
• JPY net short 90K vs net short 96k prior
• GBP net short 26K vs net short 19K prior
• AUD net short 49K vs net short 41K prior
• CAD net short 17K vs net short 14K prior
• CHF net short 24K vs net short 17K prior
• NZD net short 1k vs net short 2k prior

Markets Update:

Asian equities are mixed. While the Nikkei and Hang Seng are up on the day, the Shanghai Composite lost more than 2 % and Australia’s ASX finished the trading day lower. Gold and Silver have benefited from the recent USD pullback, while Crude Oil prices have been falling again. The US Dollar weakened overnight. While the NFP number on Friday beat expectations, wage growth was weak and USD longs decided to cover some of their positions. Looking at the CFTC data above, EUR short positioning remains at record highs, while GBP and AUD short positioning is slowly, but steadily increasing.

EUR/USD rose to a high of 1.1870 overnight. Offers in good size are reported in front of the 1.19 level, but the key resistance area lies at 1.1960-80. Everyone is waiting for the ECB meeting next week on further clues about a possible QE progamme, but given how crowded the EUR/USD short trade is and the sharp decline in past weeks, we could very well see a short squeeze back to 1.20 ahead of the meeting on January 22nd.

GBP/USD traded in a 1.5160-90 range overnight. Key resistance at 1.5260/70, while the pivotal short-term support level now lies at 1.5050. Keep in mind that we’ll get the UK inflation data tomorrow at 09:30 GMT. The Australian Dollar extended gains overnight, but the Kiwi Dollar lagged as dealers saw decent short covering in AUD/NZD from leveraged names.

Looking ahead, there are no notable data releases today, but Fed’s Lockhart and ECB’s Nowotny will be speaking in the mid-NY session.

Upcoming Events:

• 17:40 GMT – Fed’s Lockhart speaks on US economic outlook
• 18:00 GMT – ECB’s Nowotny speaks about monetary policy

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