FX News Today
European Fixed Income Outlook: Asian stock markets moved mostly higher, with the CSI 300 underperforming once again and heading south, while the Nikkei closed with a gain of 1.13%, the ASX 200 moved up a further 0.24% and the Hang Seng 0.58% as of 6:35GMT. The yuan dropped after trade figures missed estimates and amid speculation that policy makers will move to rein in gains. Overnight, RBNZ held steady at 1.75%, matching widespread expectations. Governor Spencer remained dovish, saying “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly. NZDUSD has fallen to 0.7209 from 0.7258 ahead of the Bank’s announcement. Meanwhile today,German trade surplus narrowed as export growth slowed. Germany posted a sa trade surplus of EUR 21.5 bln in December, down from EUR 22.3 bln in the previous month. Exports rose just 0.3% m/m, after jumping 4.1% m/m in December, while import growth slowed to 1.4% m/m from 2.2% m/m. The December number left the total for Q4 at EUR 63.7 bln, up from EUR 62.4 bln in the third quarter of the year, which points to a positive contribution from net exports to overall growth in the last quarter, even if this is nominal data, impacted by exchange rate developments.
FX Update: The dollar has traded mixed today, gaining moderately versus the euro, sterling, Australian dollar, among other currencies, but holding steady versus the Canadian dollar while gaining for a third straight day versus the yen. The Japanese currency has been coming under pressure as market participants trim safe haven trades as global markets find a toehold, albeit a fragile looking one. USDJPY logged a peak at 109.78, extending the rebound from Monday’s low at 108.45. EURJPY and other yen crosses have been seeing a similar price action, including AUDJPY. Japanese data showed the current account data for December at a surplus of Y797.2 bln, down from Y1,347.3 bln in the month prior. BoJ Suzuki said that there is no need for further monetary easing, contrasting in tone to Governor Kuroda, who earlier in the week said that there is no need to think about taking monetary stimulus away with inflation remaining below 1% and well off the BoJ’s 2% target. China January trade data came in much stronger than expected, though a near 40% export survey drove a sharp narrowing in the surplus, prompting the PBoC to guid the CNY lower today after the currency hit a two-year high yesterday. EURUSD lifted back toward 1.2300, reversing some of the losses seen yesterday after ECB’s Nowotny accused the U.S. Treasury of talking the dollar down.
Charts of the Day
Main Macro Events Today
- RBA’s Governor Philip Lowe Speech
- BoE’s Monetary Policy Meeting & Inflation Report – The BoE is widely expected to leave the repo rate at 0.5% and QE totals unchanged, the meeting is likely to mark a sea change in approach after BoE Governor Carney last week forewarned that the central bank is beginning to turn its focus to a more conventional stance of limiting inflation. The inflation report is likely see the BoE upgrade its growth assessment, particularly the scope for self-sustaining private sector growth while highlighting a tightening labour market and rising wages.
- Canadian Housing Starts – projected to slow further to a 210.0k unit pace in January from 217.0k in December.
- US Unemployment Claims – expected to rise to 232k from 230k in the week-ended January 27.
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