Daily Currency Update - 15 January 2015
DAILY CURRENCY UPDATE
15 January 2015
Price Action
MARKET SUMMARY
It’s a rough patch again for equities and bond buying amidst a weak US retail sales
figures and sharp fall in copper prices. The World Bank cuts it global growth
forecasts and now expects the global economy to grow by 3% this year and
3.3% in 2016, a slight downgrade from the 3.4% and 3.5% the Bank had forecast in
June. "The global economy is running on a single engine...The American one. This
does not make for a rosy outlook," the Bank’s Chief Economist Kaushik Basu warns.
With European growth anaemic and Asia slowing, the durability of the US consumer
is increasingly key for the global scene. US Treasuries rally strongly and the curve
flattens further, with 10-year yields at one stage touching 1.78% – the lowest since
May 2013. The USD also weakens.
The EUR/USD unwinds earlier weakness which followed dovish comments from
ECB President Draghi and a favourable opinion from a top advisor for the European
Court of Justice, who concludes that the ECB’s Outright Monetary Transactions
(OMT) programme is compatible with EU law. European sovereign bonds yields
continue to decline on the prospect of imminent policy easing by the ECB, with
peripheral sovereigns underperforming. US equities extend their losses for a fourth
consecutive session. European shares open weaker following the sharp fall in base
metals prices through the Asian session, with LME copper prices declining 5%.
1 Year Forward
Spot
1M High
1M Low
EUR/USD
1.1787
1.2570
1.1727
USD/JPY
117.32
121.85
115.57
GBP/USD
1.5235
1.5786
1.5035
USD/CHF
1.0188
1.0240
0.9554
USD/CAD
1.1957
1.2017
1.1381
AUD/USD
0.8157
0.8394
0.8033
AUD/JPY
95.69
101.37
94.26
NZD/USD
0.7719
0.7871
0.7609
USD/SGD
1.3342
1.3419
1.3006
USD/TWD
31.81
32.04
31.10
Onshore
Offshore
31.52
31.62
USD/KRW
1082
1122
1076
1086
1092
USD/CNY
6.1969
6.2351
6.1463
6.3642
6.3761
USD/INR
62.19
63.89
61.77
66.54
65.86
USD/IDR
12614
12938
12290
13440
13450
USD/PHP
44.68
45.11
44.45
45.32
45.15
Source: Bloomberg
Crude oil prices finish stronger, showing some signs of stabilisation. This is
despite EIA data showing U.S. crude stockpiles rose to 5.4 million barrels in the last week, far more than analysts' expectations, pointing to continued oversupply in
the market. With no change to fundamentals, the price action looks to reflect short coverings. Copper falls to its lowest levels in 5½ years following the World
Bank’s downward revision to global growth, with the market coming to terms with falling oil prices, slowing demand and growing inventories, albeit from a low base.
The release of disappointing US retail sales data helps gold maintain its stability amid broad-based volatility in commodities markets. Seaborne iron ore prices fall
further as demand for iron ore remains sluggish ahead of the Chinese New Year holidays. With sufficient inventories amid a backdrop of tight credit conditions
and weak steel prices, mills are in no hurry to restock. Many steel mills are planning to shut down for maintenance ahead of the holidays, further fuelling little need to
build inventories. Seaborne thermal coal prices remain subdued as new quality restrictions heavily impact buyer sentiment.
USD & JPY
USD
USD/JPY High Low Chart
117.32
The US retail sales were much weaker than expected in December – total retail sales declined 0.9% m/m against market
expectations of a 0.1% m/m fall.
115.57
121.85
Control group sales — which feed directly in GDP calculations — also undershot market expectations.
Despite the weakness in the December data, household consumption is still likely to have contributed solidly to Q4 US GDP growth.
Citi Economics thinks there’s a chance for upward revisions. Regardless, cost savings at the pump could propel spending in coming months, leaving real consumer
spending in the 4.0% range.
USDJPY consolidated around the 117.00 figure in early Europe and then begin to dip to the 116.80s into retail sales on good selling interest. Reaction to the data resulted
in a quick low near 116.05.
There was still supply in the 116.50s but buyers emerged earlier than some expected. It’s now nearing resistance at 117.45/70.
GOLD
Gold prices have firmed towards $1232/34, in what our commodity strategists call “incredible resilience considering the move lower in EURUSD.”
Elaborating, “Resilience suggests and ongoing long gold and short EUR and JPY as a political and policy hedge ahead of Greek elections and ECB QE.”
“With the US market now pricing-in September Fed hike (from June at start of year), it is further buttressing of the yellow metal as Asian demand picked-up from trend in
Q4.”
JPY
Japan November machine orders MoM comes at 1.3% (4.4% expected). This has taken the YoY number to -14.6% (-6.3% expected)
Japan PPI MoM comes at -0.4% (expected -0.3%)
USDJPY has gone slightly bid on this data and no trades at 117.42 – up ~ 10 pips from pre-data levels
What happened in the past 24 hours
US
US
US
Japan
Indicator
Actual
Citi
Import Prices, %MoM, Dec
Retail Sales, %MoM, Dec
Business Inventories, %MoM, Nov
PPI %MoM, Dec
-2.5
-0.9
0.2
-0.4
-3.1
-0.5
0.0
--
Consensus
Prior
-2.7
-0.1
0.3
-0.3
-1.8
0.4
0.2
-0.2
What’s happening in the next 24 hours
US
US
US
US
Indicator
Citi
Initial Jobless Claims, thousands
Beneficiaries, mn
Empire State Manufacturing, Jan
Producer Prices, %MoM, Dec
330
2.6
--0.5
Consensus
290
2.4
5
-0.4
Prior
294
2.45
-3.6
-0.2
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Daily Currency Update - 15 January 2015
US
US
Indicator
Citi
Ex Food and Energy, %MoM
Philadelphia Business Survey, %, Jan
0.1
10
Consensus
Prior
0
18.7
0
24.3
EUR, GBP, CHF
EUR
EUR/USD High Low Chart
Industrial production was better than expected in November, rising 0.2% (mkt: +0.0%) m/m to leave the annual pace of
growth at -0.4% y/y (mkt: -0.7% y/y).
Activity remains sluggish and is consistent with the need for further policy easing by the ECB.
Draghi says, “ ECB is ready to buy government bonds”. He adds, “ ECB Governing Council determined to fulfil mandate”.
The Advocate General from the European Court of Justice (ECJ) announced that the ECB’s Outright Monetary
Transactions (OMT) programme was compatible with EU law, with conditions.
Vague comments regarding ‘necessary and proportionate’ are seen by some as reassuring likelihood of a more defined
sovereign programme, as per consensus expectations.
The initial reaction to the ruling was modest and EURUSD drifted down by 10-pips or so to around 1.1785. It then gapped
down to 1.1728, but was on the way to recovery by the time NY walked in.
1.1787
1.1727
1.257
GBP/USD High Low Chart
1.5235
1.5786
1.5035
USD/CHF High Low Chart
1.0188
0.9554
1.024
CitiFX Technicals
EURUSD 240 Min Chart – Double Bottom?
There appears to be a short term double bottom in the
making at 1.1754 with a neckline at 1.1870
A rally through 1.1870 would indicate a test of 1.1986
GBP
As expected the slew of UK data showed that the general oil price sell off coupled with most other commodities, has given little to no inflationary pressure to most sectors
of the UK economy.
Any hint of a rate hike has now crept into 2016 (amazing to think that in late summer of 2014, the market was toying with the possibility of move pre year-end) and thus the
room to sell stg on lower rates for longer, seems limited
“There have been 25 times since January 2014 when - as is now the case - GBPUSD has finished a Tuesday within 30 pips of the session high. Of the 25, only 1 went on
to close the next day with net gains of more than 1 cent. The equivalent level on Wednesday is 1.5265,” says Predicted Markets.
Turnover is very high and CitiFX flows show a 54% bias in favour of buying..
What happened in the past 24 hours
Eurozone
Indicator
Actual
Citi
Industrial Production, %MoM, Nov
0.2
-0.1
Consensus
Prior
0.0
0.3
What’s happening in the next 24 hours
Eurozone
Germany
Germany
UK
Indicator
Citi
Trade Balance, SA EURbn, Nov
Full-Year GDP, Flash, %YoY
Deficit - Maastricht, % of GDP
RICS House Price Balance, %
-1.5
0.3
--
Consensus
Prior
20
1.5
0.1
10.0
19.4
0.1
0.1
13.0
AUD, NZD, CAD
AUD
AUD/USD High Low Chart
AUDUSD staged an impressive bounce in Europe back towards 0.8150 and then 0.8180 in NY.
The recovery looked to have been driven to a large extent by EURAUD, which has fallen sharply from around 1.4600
towards 1.4440/50.
This coincides with the 61.8% Fib of the rally from 1.3797 to 1.5333 and it looks like a big level to watch out for.
0.8157
0.8033
0.8394
NZD/USD High Low Chart
0.7719
0.7609
0.7871
USD/CAD High Low Chart
1.1956
1.1381
What’s happening in the next 24 hours
Australia
Australia
Indicator
Citi
Employment change, thousands, Dec
Unemployment rate, %
---
Consensus
5.0
6.3
1.2017
Prior
42.7
6.3
ASIA
What’s happening in the next 24 hours
Singapore
Indicator
Citi
Retail Sales %YoY, Nov
--
Consensus
7.0
Prior
8.1
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Daily Currency Update - 15 January 2015
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