Thursday 22nd January: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 0.30 %, Shanghai Composite gained 0.50 %, Hang Seng rose 0.80 %, ASX rallied 0.50 %
• Commodities: Gold at $1286 (-0.50 %), Silver at $18.01 (-1.00 %), WTI Oil at $47.50 (-0.50 %), Brent Oil at $49.01 (+0.60 %)
• Rates: US 10 year yield at 1.894, UK 10 year yield at 1.502, German 10 year yield at 0.526

News & Data:

• Australia HIA New Home Sales 2.2 %, Previous: 3.0 %
• Australia MI Inflation Expectations 3.2 %, Previous: 3.4 %
• New Zealand Dec ANZ Job Ads 0.8%, Previous: 0.1%
• New Zealand Dec BusinessNZ Manufacturing PMI 57.7, Previous: 55.2

Markets Update:

It’s ECB day! The market is expecting that the bank will announce a quantitative easing (QE) programme with forecasts ranging from €600 billion to €1.1 trillion in bond purchases. One German bank thinks that anything below €750 billion would seen as a disappointment and lead to a short squeeze in EUR/USD. Euro shorts are nervous as we could see yesterday, when the pair spiked more than 100 pips in 15 minutes. Positioning is extremely crowded and it wouldn’t be surprising if we see some further short covering ahead of the event.

In Asia, EUR/USD and GBP/USD both declined about 40-50 pips, but flows wee light. USD/JPY made it back above 118.00, driven by demand from local names. The commodity currencies remain heavy after the surprising rate cut from the Bank of Canada yesterday. The BoC lowered interest rates from 1.00 % to 0.75 % and USD/CAD almost made it to 1.24. This dragged the Aussie and Kiwi Dollar lower as well, with NZD/USD now below the key support area of 0.76-0.7620 and Aussie again approaching the 0.80 level.

Upcoming Events:

• 12:45 GMT – ECB Interest Rate Decision (0.05 %)
• 13:30 GMT – ECB Press Conference
• 13:30 GMT – US Initial Jobless Claims (300k)

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