FX Daily Planet: London Open

FX Daily Planet: London Open

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View for the day

Only notable move in the Friday Asian session was seen in NZD, which sharply declined (-0.6% against USD) on a much-weaker-than-expected Dec. NZ retail sales (0.0% m/m against consensus at +0.6%). Meanwhile, there were no major moves in the other G-10 currencies; JPY and USD strengthened against the others, though only modestly. EUR which was the weakest currency on Thursday remained weak today and lost another 0.2% against USD. Asian equities broadly rallied following the overnight gains in the US equities. However, USD/EM Asia was fairly mixed with MYR rising 0.2% against USD while PHP declining 0.2%. In FX vol space, 1-month implieds for JPY lowered 0.1-0.2 vols.

At yesterday's EU Leaders’ summit, it was agreed that EU would take determined and coordinated action to safeguard financial stability in the euro if needed, but no precise details about the plan or the schedule were announced. Therefore, as the uncertainties surrounding the Greek issue remain intact, we should still be aware of the risk that any relevant headlines would heighten the market volatility. The near-term focus will be Ecofin and the Greek Government's announcement about the details of its fiscal stability program on 16th Feb. On the economic data front, 4Q GDP from some countries in the euro area, Dec. industrial production from the euro area, Jan. retail sales and Feb. consumer sentiment from the US will be in focus today.

Overnight news

NZD: Dec. retail sales was much weaker than expected at 0.0% m/m (cons. +0.6%).
JPY: MoF’s weekly portfolio flow data showed that foreign investor turned net buyer of Japanese stocks last week. Meanwhile, net foreign stock purchase by Japanese investor increased to ¥202bln from ¥126bln last week.
JPY: Jan. consumer sentiment improved to 39.4 from 37.9 in Dec.
JPY: Japanese Banking Minister Shizuka Kamei said that Japan Post could buy more US Treasuries as one way to reduce its current heavy focus on domestic government debt.
USD: Fed data showed that Federal Reserve’s balance sheet expanded in the latest week.
EUR: ECB Nowotny said that Europe does not want Greece’s problems to have a negative effect on the broader region, therefore it makes sense to contain the risks and avoid a spillover.

Today’s watchlist (all times GMT; +11hrs for Sydney, +9hrs for Tokyo, -5hrs for New York)

EUR: Germany 4Q GDP prelim. (%q/q, sa) @7:00 (JPM: 0.0, Cons: 0.2); ECB Nowotny speaks @8:00; Euro Area 4Q GDP (%q/q, sa) @10:00 (JPM: 0.3, Cons: 0.3); Euro Area Dec IP (%m/m, sa) @10:00 (JPM: -1.0, Cons: 0.1)
USD : Jan retail sales (%m/m, sa) @13:30 (JPM: 0.0, Cons: 0.3); Jan retail sales less autos (%m/m, sa) @13:30 (JPM: 0.5, Cons: 0.5); Feb U.Michigan consumer conf. prelim (index) @14 :55 (JPM : 74.0, Cons : 75.0) ; Dec business inventories (%m/m, sa) @15:00 (JPM: 0.0, Cons: 0.2)

Overnight price action

FX: NZD underperformed G-10 currencies on the weak retail sales. JPY and USD modestly strengthened against G-10 currencies. USD/Asia range-traded.
FX vol: 1-month JPY implieds lower by 0.1-0.2 vols.
Commodities: Oil down 0.3%.
Bonds: JGB yields largely flat across the curve.
Equities: Asian equities broadly rallied. Nikkei outperformed with a 1.3% gain.

Technical View for the day

The handling of the Greek issue is definitely not what markets were looking for in terms of re-establishing confidence in the EUR what conclusively caused a bit of a headache in form of a stronger sell-off. This feeds into the general perception that the EUR is caught in a broader down-swing towards the 1.31 handle in EUR/USD which would only change once major barriers at 1.3852 and at 1.3965 would be taken out. As Cable refused to join the selling stampede EUR/GBP entered a real nose-dive but would need to break below key-support at 0.8658/13 to confirm a sustained decline towards the last bottom at 0.8400 and a potential extension into Fib.-support at 0.8250 With the EUR under tremendous pressure across board and in particular against commodity currencies we are now approaching key-supports like in EUR/CAD at 1.4285/48 from where we could at least get to see a temporary EUR bounce whereas the big picture is ultimately pointing even lower

Research from the region you may have missed

New Zealand: consumer spending hit a wall in December
https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-373969-0

ENDS

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