Currency Updates:
AUD/USD O/n carry-over highs from a weak USD following Tues’s weak Durables report was followed by selling in early London and a second small slide after the Fed statement kept the patient tightening scenario intact. AUD/USD fell to 0.7900 during the Asian morning session when the MAS surprised by lowering the slope of its NEER, which was viewed as a form of easing. It rallied when Aus CPI was released and showed underlying inflation was a bit hotter than expected. The IOS was pricing in a 40% chance of a RBA easing next week before the AUD CPI and below 10% in the aftermath of the release. Another tumble in commodity prices, particularly oil, after US storage levels exploded for a second week in a row, isn’t helping commodity ccys amid relentless drops in industrial metals and coal prices and another drop in China’s growth target to 7% and chatter about yuan weakness. This week’s o/s bounce has run out of gas before even threatening a close above the Dec 23 high & daily pivot pt at 0.8056. Bids by 0.7900 hold so far in the FOMC aftermath.
EUR/USD opened NY 1.1354 having traded 1.1330-80 in London. The FOMC monetary policy event risk just too great to allow more price elasticity. O/N US building permits data +0.6% wasn’t bad for a December print. No other real data. NY traded 1.1303/62 pre- FOMC and 1.1309/70 post- FOMC. Apparent selling interest c 1.1370 as the next bounce stalled at 69. Bids remain in place near the base, next downside probe stalled at 22. FOMC was pretty much as expected, Fed now “patient” only (no qualifiers) upbeat on economic conditions and labour markets, looking through low inflation and no dissenters. One phrase resonated- if incoming info indicates faster progress toward FOMC’s employment/inflation objectives, increases in target FF range likely to occur sooner than currently f/c. This was a repeat of Dec’s message but the Fed’s upbeat view seems to make it the more likely of the two (opposite if data deteriorates) Thur only US weekly jobless claims/pending home sales but in Europe there’s German unemployment, EZ M3, consumer confidence/ various econ polls.
USD/JPY Early EUR/JPY weakness on renewed Greek concerns were followed by selling pressure on the commodity crosses after the FOMC statement elicited a modest tightening tantrum. Any tightening the Fed may be planning this year is forcing a rapid flattening of the Tsy curve as longer term issues are bought. Even 2-yr USD-JPY spreads are falling on the Fed’s fairly upbeat statement. US stocks are again under pressure and dragging N225 futures down with them, though Japanese stocks have been outperforming US stocks recently. Talk of the BOJ and/or Japanese pension funds buying Japanese stocks also noted. USD/JPY is finishing NY closer to the 6-day up TL at 117.35 last. Yesterday’s low was 117.34 and the Tenkan is at 36. 117.25 is the next downside pivot pt. Tumbling oil and commodity prices, along with the post-FOMC derisking, have pushed AUD/JPY, CAD/JPY, GBP/JPY and other crosses to session lows. CAD also suffered from negative revisions to last month’s jobs report. Japanese investment flows and retail sales data are on tap tonight. German Jobs & CPI data will add to the EUR/JPY intrigue Thursday.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Trade – Imports* Dec f/c 4.21b, 4.24b-prev
• 21:45 NZ Trade Balance* Dec f/c -26.5m, -213.0m-prev
• 21:45 NZ Trade Balance YY* Dec f/c -0.98b, -0.45b-prev
• 21:45 NZ Trade – Exports* Dec f/c 4.21b, 4.02b-prev
• 23:50 JP Foreign Bond Inv w/e -397.2b-prev
• 23:50 JP Foreign Invest JP Stock w/e -577.4b-prev
• 23:50 JP Retail Sales YY Dec f/c 0.9%, 0.40%-prev
• 00:30 AU Export Prices* Q4 -3.90%-prev
• 00:30 AU Import Prices* Q4 -0.80%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
