Currency Updates:
U.S. Dollar Trading (USD) volatility continued throughout the Chinese New Year Celebrations with comments from US Treasury Official Brainard that she supports Japanese efforts to end deflation via aggressive monetary easing. Other speakers overnight included FED member Yellen who restated the case for the FED to target employment given the historically high unemployment rates currently seen even considering the recession. The FED has recently linked the end of the bond buying to an unemployment rate under 6.5% and so jobs numbers have grown in importance in recent months. Looking ahead, SNB Jordan speaks, FED Member George Speaks.
The Euro (EUR) EUR/USD grinded higher from 1.3360 to 1.3410 lifted by EUR/JPY buying. There were lots of Euro FX comments overnight but the most prominent was ECB Weidmann stating latest indicators didn’t signal a serious overvaluation of the Euro. The German FinMin backed this up stating the market should set FX rates and the G20 should stick to the agreed line against manipulation.
The Japanese Yen (JPY) USD/JPY returned aggressively to the uptrend soaring from Y92.50 to fresh trend highs above Y94 after comments from the US Treasury Official Brainard that the US endorses Japans effort to end deflation and boost growth. EUR/JPY is leading again up to above Y126 from Y123 Asian open.
The Sterling (GBP) the GBP/USD returned to its downtrend falling sharply overnight from 1.5800 to 1.5660. The recent buying post carney has faded and we will be looking to economic data to see if the recent slip into recessionary numbers continues. EUR/GBP reversed higher towards breaking back above 0.8500. Looking ahead, January CPI forecast at 2.7% unchanged from December y/y.
Australian Dollar (AUD) the AUD was weak from the open and fell to fresh lows as EUR/AUD buying resumed in mass. 1.0250 has held strong so far on two attempts in Asia but the trend will be hard to reverse given the deteriorating Australian outlook and the large long positions built up in the market over the past few years. Update January Business Confidence at 3 unchanged.
Oil & Gold (XAU) Gold broke through the downside of the range as physical demand globally remained weak and then technical sellers hammered the precious metal lower to $1645. OIL/USD remained strong rebounding off a $95 test to rally all the way back to $97 resistance.
