Currency Updates:
AUD/USD opened Noram marts 1.2480, – 16 pips vs Friday’s close, O/N range 1.2453/91, AUD/CAD 0.9527, +0.28%; DXY +0.11%. It was an inside day after Friday’s NFP fireworks (NY range 1.2430/1.2574) and we jobbed 1.2438/83, the Loonie tracking oil higher initially. Oil futures opened firm, Brent +2.31%, WTI +2.28% and have continued with gains (+5.75% & 6.1% respectively) but the commodity bloc dislocated from oil (and gold) USD/CAD closing around 1.2465/70, regaining lost ground vs NOK and ZAR which had rallied hard in the AM along with EM currencies. EUR/USD dropped almost 60 pips from its highs and the ccys tracked that pair, rather than the fundamentals. There’s some nervousness ahead of the RBA meeting tonight which dragged AUD lower.
EUR/USD Tiny range to start the week, but one that has so far held above the weekly Tenkan at 1.0953 with help from Fri’s poor US jobs report. The jobs report couldn’t keep Tsy yields or US stocks down on Monday, which in turn put a little pressure on EUR/USD in the latter part of the NorAm session. A SF Fed study on L-T inflation expectations suggested that those expectations remain anchored near the Fed 2% PCE target, and were only transiently raised by higher f/cs that came when the Fed began QE and near ZIRP. It’s a glass half empty/full issue, with hawks thinking the can pay less attn to recent oil-related pressure on prices, while doves think the anchoring of 5-10-yr inflation by 2% means there is ultimately less need for Fed tightening. Hawks won out today, despite Dudley’s slightly dovish comments. EUR/USD needs a close above the 23.6% of the 1.2887-1.0457 slide at 1.1036 to convince the growing cohort of bearish specs they are wrong. EZ Markit Composite & PPI out Tues.
USD/JPY Friday’s weak NFP report was shrugged off on Monday, as rising Tsy yields, particularly out the curve, pulled prices higher after the 10ET options cut, despite as-f/c ISM services and Dudley comments that were commensurately dovish with Friday’s Jobs news. The Street is looking beyond Q1 now, writing it off as another weak start to the year that’s likely to be followed by better data in the remaining 3 qtrs. USD/JPY bounced off the daily Cloud and back up to the Tenkan at 119.35. Dwindling net spec yen shorts at the IMM show Japanese buying of foreign stocks and bonds offsetting some of the spec paring, but not all of it. This week’s BOJ meeting is expected to leave QQE2 intact, as the BOJ looks to the Abe govt for the missing 3rd arrow reforms. EUR/JPY has retaken the Kijun with today’s high, which puts in play the Mar 18 rebound high at 131.67, as well as the 50% Fibo & weekly Tenkan at 131.81.
Looking Ahead – Economic Data (GMT)
• 01:30 AU Retail Sales Feb 0.4 exp v 0.4-prev
• 01:30 AU ANZ Newspaper Mar 8.1-prev
• 01:30 AU RBA Cash Rate 2.25% exp v 2.25%-prev
Looking Ahead – Events, Other Releases (GMT)
• BOJ begins two-day policy meeting
