The US $ is mixed in the O/N trading session. Currently it is up against 11 of the 16 most actively traded currencies, in a ‘tepid’ trading range ahead of today’s US Leading Index. Do not expect too many surprises in this lack luster market. The US $ has performed well over the past week, currently there is no reason to break out of its tight range.
The US $ currently is trading higher against the EUR -0.02%, CHF +0.09%, JPY +0.30% and lower against GBP +0.02%.The commodity currencies are weaker with AUD -0.08% and CAD +0.25%. The ‘loonie’ continues to trade under pressure not from oil, but from futures trader’s ‘paring’ position on the exchange, coupled with some M & A deals. Traders see short term US $ gains limited to around the 1.1800 mark and prefer to sell CAD on any US $ pull back. The AUD $ continues to appreciate, the interest rate differential debate has investors looking for the high yielding assets to invest in. Traders see a 43% chance that Governor Stevens will raise RBA’s O/N rates on Feb. 6th.
Crude is higher ($52.68 up 68c) O/N. According to the National Weather Service Friday, oil demand should rise this week because of cooler temperatures in the eastern part of the US. They expect below normal conditions from Jan. 23 through Jan. 27. Gold is little changed ($634 down $1) O/N, traders are looking to buy the ‘yellow metal’ on any pull back as an alternative investment to the US $.
The Nikkei closed at 17,424 up +113. The DAX index in Europe was up +8 points at 6,756; the FTSE (UK) currently is 6262, +25 points. The early call for the open of key US indices is higher. Yields of the US 10-year note backed up 2bp on Friday, (4.78%). According to a report by PIMCO, OPEC nations are selling Treasuries at the fastest pace in more than three years as crude oil prices ease (Yields backing up). This should provide support for the ‘greenback’, with the interest rate debate, higher yields will bring ‘forth’ investors who will require the US $.
Some analysts are looking for the EUR to appreciate by 10-12% this year (1.4200-4500), as the ECB welcomes a stronger currency to curb inflation. Higher interest rates have increased the EUR demand over the past 12 months (3.5%), it has appreciated 6.9%. An appreciating EUR will have the same effect as Tichet’s current tightening policies (1.2955).
CHF trades heavy against EUR (1.6192), as inflation indicators are easing and investors take advantage of the ‘carry trade’. Recent producer and import price data have slowed recently. Hawkish rhetoric from ECB council members coupled with a muted SNB have traders anticipating that Swiss rates are close to their ‘top’ (2%).
Traders still expect Sterling to outperform the EUR short term (65.65), after reports showed house prices rose in Jan. and the economy will expand this year at its fastest pace since 2004. Futures traders are anticipating that the BOE will raise interest rates a quarter point by Mar. (5.25%). Look for CBL to trade close to $2 over the next three months, as the market prefers to be a buyer on any pull backs.
On Tap:
10:00 am USD Leading Index m/m 0.2% vs. 0.1%
3:20 pm USD San Fran Fed President Yellen Speaks
Jim
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