Wednesday 28th January: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei gained 0.40 %, Shanghai Composite declined 0.20 %, Hang Seng rose 0.60 %, ASX increased 0.10 %
  • Commodities: Gold at $1292 (-0.10 %), Silver at $18.00 (-0.50 %), WTI Oil at $45.60 (-1.35 %), Brent Oil at $49.08 (-0.05 %)
  • Rates: US 10 year yield at 1.821, UK 10 year yield at 1.494, German 10 year yield at 0.38

News & Data:

  • Australia CPI q/q 0.2 %, Expected: 0.3 %, Previous: 0.5 %
  • Australia CPI y/y 1.7 %, Expected: 1.8 %, Previous: 2.3 %
  • Australia Trimmed Mean CPI q/q 0.7, Expected: 0.5 %, Previous: 0.4 %
  • Australia Weighted Mean CPI y/y 2.3 %, Expected: 2.2 %, Previous: 2.6 %
  • Australia MI Leading Index 0.0 %, Previous: -0.1 %
  • China Westpac MNI Consumer Sentiment Index 112.1, Previous: 112.5
  • SWIFT: Yuan replaces Canadian dollar as the fifth most used currency
  • Monetary Autorithy of Singapore: Cuts the slope of currency band
  • MAS: To maintain width and level at which SGD is centred
  • MAS: Adjustment appropriate with mid-term price stability
  • MAS: Ready to curb sharp movements in SGD NEE

Markets Update:

The main event overnight was the Australian CPI release. While the headline number missed expectations slightly, the trimmed and weighted figures came in higher than expected. However, the downward revisions to Q3 of last year leave the year-end prints at 2.2 % and 2.3 % respectively, which is pretty much in line with the RBA forecasts. Mixed data overall, but the price action in AUD/USD suggests that the market was caught a bit too short at low levels. All in all, most banks expect that the RBA will cut rates in the coming months.

AUD/USD rallied to 0.8010 from a low of 0.7900 ahead of the data release. Decent selling interest reported at 0.8050-60, which is the next major hurdle for AUD bulls. Dealers saw good buying from leveraged names in AUD/NZD, which rallied over a 100 pips up to 1.0750. Meanwhile, the NZD/USD remains quiet ahead of the RBNZ meeting tonight.

The EUR/USD short squeeze extended in yesterday’s NY session, but momentum waned as we went into the Sydney open. 1.1250 is now the pivotal short-term support level, while 1.1480/1.15 will be a tough resistance area, as selling interest remains high overall.

It almost looked like USD/JPY will finally break out of it’s 117.20-118.80 range yesterday, but the pair bounced off 117.30, inspired by the recovery in the US stock indices. Heading into the London open, we are again in the middle of the range, around 118.10. Further consolidation seems likely for today, but perhaps the FOMC minutes will finally bring some momentum and push the pair out of the current range.

Looking ahead, there is a data-light session ahead of us, with the FOMC Minutes and RBNZ in the late NY session the main events today.

Upcoming Events:

  • 07:00 GMT – German GfK Consumer Climate (9.1)
  • 07:45 GMT – French Consumer Confidence (91.0)
  • 09:00 GMT – Norwegian Unemployment Rate (3.8 %)
  • 19:00 GMT – FOMC Statement
  • 20:00 GMT – Reserve Bank of New Zealand Interest Rate Decision (3.50 %)
  • 20:00 GMT – RBNZ Statement
  • 21:45 GMT – New Zealand Trade Balance (-NZ$27mln m/m, -NZ$980mln y/y)

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