Tuesday 25th November: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 0.30 %, Shanghai Composite gained 0.80 %, Hang Seng down 0.05 %, ASX lost 0.50 %
  • Commodities: Gold at $1199 (+0.20 %), Silver at $16.55 (-0.75 %), Crude Oil at $75.70 (-0.10 %)
  • Rates: US 10 year yield at 2.30, UK 10 year yield at 2.045, German 10 year yield at 0.782

News & Data:

  • Australia Inflation Expectations 2.1 %, Previous: 2.2 %
  • Bank of Japan Governor Kuroda: Will continue to take appropriate monetary policy, important that companies actively use their profits
  • Kuroda: Weak Yen boost exports, weak Yen helps profits for global companies
  • Kuroda: Will continue to carefully monitor FX moves, desirable FX moves in line with fundamentals
  • Kuroda: Expects exports to increase gradually, BOJ easing is to achieve target as soon as possible
  • BOJ Members: BOJ to keep easing until 2% inflation stable. Will check risks, make adjustments as needed
  • BOJ members: Japan’s economy has continued to recover moderately, inflation to be around 1% for some time
  • BOJ Members: Pressure on inflation to stay until 1H FY15, this pressure to stay if oil prices stay low

Markets Update:

USD/JPY briefly traded above 118.50 in the early Asian session, but quickly reversed amid supply from Japanese corporates & fund names. Intraday longs then covered positions and some stops were triggered through 118.10 and beneath the big figure. We have seen the usual comments from the BoJ and Governor Kuroda, with no surprises there. They are “carefully monitoring FX moves”, but don’t seem overly worried about the sharp Yen decline so far. Large bids reported into 117.40 and the 117.30 support area. A break below would very likely trigger further position covering as well as some sizeable stops. To the topside, immediate resistance seen at 118.50/60 and then 119.00.

EUR/USD bounced and dealers saw some short-covering from leveraged names yesterday, which is not surprising given the sharp sell-off on Friday. Comments from Bundesbank’s Weidmann that QE faces many legal hurdles helped the Euro higher, but the topside has so far been capped at 1.2440. It seems like we could see a breakout higher, but selling interest remains decent and there are larger offers resting from 1.2480 up to 1.25. To the downside, key support at 1.2350 and it will need a clear break lower for the downtrend to resume.

Meanwhile, GBP/USD is still struggling with the 1.5730 resistance. Should we fail to breach that level soon, selling is likely to resume and the pair will head for another 1.5590 test. In terms of upcoming event risks, BoE Governor Carney will be speaking today at 10:00 GMT and we’ll also get the latest UK inflation numbers tomorrow.

AUD/USD hit a low of 0.8564 overnight, as risk assets got a bit under pressure. Dealers have also seen a good amount of selling going through in the AUD/JPY – likely leveraged names covering some positions. The pair touched 101.00 briefly and bounced from there back to 101.40.

USD/CAD flows were light in Asia. Offers reported at 1.1320, while decent bids noted from 1.1230 down to 1.1220. There is an OPEC meeting on Thursday and the increased volatility in Oil prices will likely have an impact on the USD/CAD as well.

Upcoming Events:

  • 07:00 GMT – German GDP (0.1 % q/q, 1.2 % y/y)
  • 10:00 GMT – Bank of England Governor Carney speaks
  • 13:30 GMT – US GDP (3.3 % q/q)
  • 13:30 GMT – US GDP Price Index (1.3 % q/q)
  • 13:30 GMT – Canadian Core Retail Sales (0.4 % m/m)
  • 13:30 GMT – Canadian Retail Sales (0.6 % m/m)
  • 15:00 GMT – US CB Consumer Confidence (95.9)

Source:: Tuesday 25th November: European Open Briefing

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