Currency Updates:
U.S. Dollar Trading (USD) The USD got a boost as the largest FX pair in the market the EUR/USD sunk after the ECB meeting overnight. The market has been in a strong uptrend for months so it remains to be seen whether this is just a correction or the start of a larger move. Weekly Jobless Claims were near expectations at 366k vs. 360k previously. Looking ahead, December Trade Balance forecast at -46bn vs. -48.7bn previously.
The Euro (EUR) the main currency in action yesterday paring back gains against the USD, JPY and GBP before stabilizing into the close of New York. EUR/USD fell to 1.3370 from 1.3550 as Draghi was downbeat on the Eurozone outlook for the rest of the year and left the door open to be critical of FX moves if they affect ECB forecasts after the release of EU economic data in February. In particular he is concern about higher Euro potentially causing lower inflation. EUR/JPY fell as low as Y124.50 but has since recovered to Y125.50 with a bounce in US stocks.
The Japanese Yen (JPY) was stronger as EUR/JPY selling encouraged market wide profit taking from USD/JPY to AUD/JPY. EUR/JPY buying finally emerged at Y124.50 still above the Y124 lows on Tuesday before the large Middle Eastern sovereign orders shot the volatile pair to record highs at Y127.70. Buyers are more cautious with G20 meetings ahead likely to discuss the recent BOJ change of policy.
The Sterling (GBP) reacted positively to new BOE Governor Carney comments that he will be looking to create an exit plan for the BOE’s recent Asset Purchases which surprised the market given expectations of a more dovish tone. He rejected the FED model of unlimited printing of money and was very candid in his expectation of the tough road ahead for the UK economy. Confidence seemed to be restored in the Pound and gains were strong especially against the Euro. Looking ahead, German December Trade Balance forecast at 14.8bn vs. 14.6bn previously.
Australian Dollar (AUD) the AUD/USD is continuing to slide with little bounce as the technical remain bearish and we move further from the stable 1.030-1.06 range that had held for the past few months. Parity is the obvious target for the bears while support is coming through the AUD/JPY and EUR/AUD liquidations seen overnight. Weak fulltime employment numbers were hidden in a strong headline figure yesterday for January jobs and add to further calls for a rate cut in March. Looking ahead, Chinese Trade Balance forecast at 22bn vs. 31bn previously.
Oil & Gold (XAU) Gold was volatile but held the recent range falling from $1680 to $1660 before rebounding back to $1683 and finally back to $1672. OIL/USD dropped with US stocks from $97 to $95.50 before stabilizing near $96 a barrel. The recent rally could have further to fall given the size of the gains but $95 was strong earlier in the week.
