Tuesday 21st April: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 1.05 %, Shanghai Composite gained 0.85 %, Hang Seng rose 2.20 %, ASX is 0.20 % higher
  • Commodities: Gold at $1195.80 (+0.20 %), Silver at $15.96 (+0.50 %), WTI Oil at $57.74 (-0.25 %), Brent Oil at $63.38 (-0.12 %)
  • Rates: US 10 year yield at 1.883, UK 10 year yield at 1.579, German 10 year yield at 0.076

News & Data:

  • Hong Kong Buys $5.85 Billion This Month to Defend Currency Peg – BBG
  • Asia Stocks Climb on Hong Kong Rally as Dollar Gains; Oil Swings – BBG
  • Japan Nominates Former Toyota Executive to BoJ Policy Board – BBG
  • RBA: Rates right for time being, board accepted easing might be needed
  • RBA: In considering rate cut, discussed asset prices, AUD, uncertain response of savers and borrowers
  • RBA: Board saw advantage in waiting for more data, including on inflation
  • RBA: Lower AUD would help economy, further decline likely given weak commodity prices
  • RBA: Iron ore prices had fallen more than forecast, could further curb mining investment
  • RBA: Non-mining business investment softer than expected, might even decline over year
  • RBA: Board alert to risk low rates could fuel imbalances in housing market
  • RBA noted housing credit had stopped accelerating, home price strength mainly in Sydney
  • RBA: Household consumption, home building had picked up but GDP growth likely below trend
  • RBA: Board noted government spending made no contribution to growth in past year
  • RBA: Board discussed unusual trading in AUD just prior to February and March meetings
  • RBA: Internal inquiry found no evidence of lapses leading to early release of information

Markets Update:

The US Dollar strengthened against most currencies overnight, while Asian equities indices are all up on the day. Worries about Greece are keeping the Euro under pressure, with EUR/USD declining from 1.0820 to a low of 1.0710 yesterday. It consolidated within a tight range in Asia, but a test of the bids at 1.07 seems likely in the near-term. GBP/USD has been dragged lower by broad USD strength and after the brief dip below 1.4880, the 1.4810/15 support area will be a key one for bulls to watch.

Meanwhile, the Swiss Franc is benefiting from renewed worries about Greece. EUR/CHF has posted fresh lows yesterday and is currently trading at 1.0262. Analysts at some of the larger Swiss banks think that the SNB will intervene in the market should the pair get close to the 1.00 level. So far there has been no sign of any meaningful intervention in the market, as the EUR/CHF has been dropping gradually and rallies have been limited.

The main event overnight was the release of the RBA minutes. RBA Governor Stevens already took the chance to talk the Aussie Dollar lower at his speech yesterday and the minutes provided little new information. Rate cuts are clearly on the table, but a cut in May is not a sure thing. AUD/USD fell below 0.77, but there wasn’t any significant downside momentum and the pair is now slowly marching back towards the aforementioned level

Looking ahead, there are only a few important data releases scheduled for today (see calendar below).

Upcoming Events:

  • 08:30 BST – Sweden Unemployment Rate (8.3 %)
  • 09:30 BST – Hong Kong CPI (4.5 % y/y)
  • 10:00 BST – German ZEW Economic Sentiment (55.3)
  • 10:00 BST – German ZEW Current Conditions (56.0)
  • 10:00 BST – Euro Zone ZEW Economic Sentiment (63.7)
  • 13:30 BST – Canadian Wholesale Sales

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