The EUR’s direction this week should have been influenced more by Euro fundamentals – but it was not. The 17-member single currency has ended up being pushed and pulled by a screaming yen that happens to be supported by the BoJ’s aggressive monetary easing program. In hindsight, this week’s asset and forex moves have more to do with the markets anticipation of what the Japanese investor will be doing and not what they are actually doing.
The EUR reached its “prudent” breaking point on Friday. This months EUR/JPY 12-big figure move beckoned long positions to take some profit off the table – with JGB yields rising instead of falling post BoJ is undermining this one directional trade. A healthy trade requires some breathing space and by booking profits for whatever reason – JGB’s getting slammed, headlines on Cyprus asking for more money or Italy needing to raise +EUR60-billion in more funding – that instigates an “orderly retreat” only proves the ‘worth’ in that overall trade.
It is a tad surprising that weaker US retail sales data and consumer sentiment did not produce more dollar buying against the EUR. The market seems comfortable buying EUR’s on dips, despite the daily technicals looking overbought. With not decent sign of a turnaround just yet, buying dips “safety in numbers” remains the number one course of action.
Next week it should be a quiet start to the week with no data from the UK or elsewhere in the Eurozone. There are no auction to even speak of, which should leave investors to ponder over what was said and not said at the Euro-finance ministers meeting in Dublin and possible event risk from North Korea.
- Cyprus President wants more EU “assistance”
- More Jobs Available in London
- German Finance Minister Declares MOU for Cyprus is Ready
- French President to Eradicate Tax Havens
- Spanish Industrial Output Falls 6.5 percent in February
- Focus on Austerity May Lead to ‘Endless Depression’ for Europe
- Political Instability adds to French Woes
- Even as Confidence Gains, U.K. Economy Will Struggle
- Weidmann: No Bank is Safe. Winding down possibility remains.
- European Commission warns Portugal on Breaking Austerity Agreements
- French Oil Companies Upset at double standards for Geothermal Energy Drilling
WEEK AHEAD
* CNY Real GDP
* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR Euro-Zone Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* USD Consumer Price Index
* NZD Consumer Prices Index
* GBP Bank of England Minutes
* CAD Bank of Canada Rate Decision
* USD U.S. Federal Reserve Releases Beige Book
* CAD Consumer Price Index
Week in FX Europe – EUR/JPY’s 12-Big Figure Move Dominates EUR demand | OANDA Forex Blog
Despite concerns about Cyprus and an unexpected drop in this month’s German business confidence numbers, the 17-member single currency is rounding off the week trading higher against most of its major trading partners. Many participants still expect the ECB to perform another one of its Houdini acts. Capital Markets remain composed; most likely due to the fact that investors have gotten used to the last minute Euro-solutions. They are clinging onto hope that Cyprus will get a deal done over the next three-days.
In a worst-case scenario – Cyprus having to leave the Euro-zone – some investors are holding on to the belief that the ‘buck’ stops with the island country and no widespread contagion will actually occur. While traders are taking profit on the short EUR positions ahead of the weekend they are also selling their long winning dollar positions accumulated during this quarter. If by Monday and things do actually go “pear-shaped” for the market, any EUR weakness may only be brief as the ECB will be quick to react to calm the markets through their OMT or the ELA programs.
- German Ifo Sentiment Index Falls as Crisis returns to Europe
- Europe Considering Closing Cyprus Banks and Asset Freeze
- EU Bailout Ultimatum Leads to Possible Cyprus Euro Exit
- Turkey May Block Natural Gas for Cyprus Bailout Negotiations
- Cyprus may enact new laws to prevent bank runs
- Russia and Cyprus Discuss Banking and Natural Gas Deals
- The UK Budget Doesn’t Help the Pound
- Cyprus Bank Closure Extended to 26 Mar as Solutions Sought
- Portugal FinMin Recovery will Take Decades
- IMF Lagarde Apartment Searched for her role in 1997 Case
- Euro Drifts Toward 4-Month Low Below 1.29
- Cyprus Rejects Bailout Tax on Deposits
- French Finance Minister EU Cannot Lend Cyprus more than 10 billion
- Europe Car Market Shrinks 10 percent in February
- Vote on Bailout Levy Might be Postponed as Official hope to Modify to Avoid Defeat
- Merkel Bows to Public Discontent Considers Capping Executive Pay
- German ZEW Increases in March
- Draghi and Cyprus Not Seeing Eye to Eye
- Cyprus Parliament Unlikely to Pass Levy Vote
- EU wants 5.8 Bln From Cyprus no matter what
- Cyprus Bailout a Reality Check
WEEK AHEAD
* USD Fed’s Bernanke Speech
* USD Durable Goods Orders
* USD Consumer Confidence
* GBP Gross Domestic Product
* CAD Bank of Canada Consumer Price Index Core
* EUR Unemployment Change
* USD Gross Domestic Product
* USD Reuters/Michigan Consumer Sentiment Index
Week in FX Europe – Another Last Minute Houdini Act from The ECB? | OANDA Forex Blog
Sterling’s wild magnetic ‘option’ strike ride (1.4950,1.5150) over the last two-trading sessions has managed to knocked many weak short cable positions out. Governor King himself provided added fuel – “the recovery is in sight”- the only thing in sight is his impending retirement. His comments that sterling had probably weakened far enough prolonged the painful short-squeeze. This market may have misinterpreted his comments. Why would he be talking up the pound?
Sterling’s fall from such lofty heights has been swift, so much so that it had become a market congested with only sellers. Any ‘reversal-of-fortune’ would of course be rapid and costly – exactly what investors have been exposed to since Thursday. In truth, this market has become too fixated on a straight pound move.
At the same time, the 17-member single currency has managed to have its way with the “mighty dollar,” which would suggest more of a dollar move rather than a pound fixation. The dollars strength has come a long way and its only natural to witness a partial retracement. US data this week confirms that their economy is the best performer amongst the G4 major currency regions, whilst the UK entertains a triple-dip recession scenario.
If you believe in King, then his remarks this week will likely have watered down expectations for more QE next month. The techies will love it; an excuse to signpost that the low is in and that 1.50 is the new base. However, all the good work could come undone by next Wednesday’s annual UK Budget report when Treasury could change the inflation-targeting remit of the BoE.
- Majority of Europe Wishes to Exit Austerity, not Germany
- Greek Troubles Continue as Statisticians used as Scapegoats
- Bank of Italy Asks Lenders with Losses not to Pay Bonuses or Dividivends
- Greek Bailout Talks for Next Tranche Delivery Break Off
- Irish Bond Auction a Success
- UK Cameron Getting House In Order
- French President Admits Country will miss Deficit Targets
- UK Manufacturing Drags GBP Down
- German Central Bank Governor Warns Crisis not Over
- Merkel Coalition Partner Agrees with The Chancellor on Euro
- German Imports Rise in January
WEEK AHEAD
* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* GBP U.K. Chancellor Osborne Presents 2013 Budget to Parliament
* EUR German Producer Prices
* GBP Bank of England Minutes
* GBP Jobless Claims Change
* USD Federal Open Market Committee Rate Decision
* NZD Gross Domestic Product
Week in FX Europe – Is Sterling’s Magnetic Option Ride Over? Maybe Next Wednesday | OANDA Forex Blog
Record High Unemployment Marred Rajoy First Year Greece Brings Charges Against Statisticians UK Unemployment Fell to 7.7% 18 Month Low France Plans to Implement Financial Transaction Tax BoE Governor Says More Needed to Restore Confidence in Banks Bank Of Spain Says Recession Has Deepened Potential for UK to leave EU before 2017 Draghi Says ‘Darkest Clouds’ Over Europe Have Receded U.K. to Have Referendum on Leaving EU by 2017 Positive and Negative Signs for the EuroZone in 2013 Disagreements expected over ESM Funds Meeting
Week in FX Europe – EURO Landing Continues To Have Opportunities | OANDA Forex Blog
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