FX markets are still digesting yesterday’s SNB announcement to lower rates and physically intervene in the currency markets. Chinese Premier Win Jiabao voiced concern over its massive US Treasury holdings. Japanese January industrial production dropped -10.2% m/m & -31.0% y/y, slightly worse than expectations. Today will mark the start of the G20 meeting of Finance Ministers and Central bankers.
[B]News and Events:
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FX markets are still digesting yesterday’s SNB announcement to lower rates and physically intervene in the currency markets. The EURCHF touched 1.5400 in the Asian session before retracing to 1.5325. The SNB lowered their target rate by 25bp to 0.25% putting the new 3m LIBOR range at 0.0% -0.75% and added they would use �all means� necessary to keep rates at the lower end. But the real market shaking event was the SNB announcement that it would buy foreign currency to halt further CHF appreciation against the EUR. This form of QE will be unmistakably negative for the CHF near term and expect the CHF to continue to weaken. We have also seen a market appreciation in CEE currencies due to the SNB announcement. Overall, there has been a significant improvement in risk appetite due primary to the rally in equity markets, which will weigh on the USD. In addition, worries by Chinese Premier Win Jiabao over its massive US Treasury holdings has also caused USD selling. China, the U.S. government�s largest creditor, is �worried� about its holdings of Trsys and wants assurances that the investment is safe. China is clearly concerned that the Fed will solve this crisis with the fiscal deficit and QE, which will increase inflation and make their investments less valuable. Japanese January industrial production dropped -10.2% m/m & -31.0% y/y, slightly worse than expectations. These new figures, combined with yesterday’s GDP data, clearly illustrate that the export-driven Japanese economy is feeling significant pressure from the collapse in global demand. We are sticking to our near term forecast of 100.00 for the USDJPY. Today will mark the start of the G20 meeting of Finance Ministers and Central bankers. There seems to be a significant ideological gap between the US and Europe on where the main objective of the meeting will be. And in our opinion will stymie any real progress and keep event risk low. The US is looking towards fiscal stimulus to support international growth, while Europe is less keen to move further in that direction and, instead, is looking for an agreement on regulation in financial markets. One area both side should find commonality will be the need for EM countries to increase IMF funding for weaker EM counties. In Canada, employment figures are expected to show further erosion in the labor market. Note that Canadian employment figures historically have been irregular so an upside surprise cant be ruled out. However, the CAD has been trading on risk appetite more than on the underlying economic data.
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Today’s Key Issues (time in GMT):[/B]
10:00 EUR Retail sales, % m/m Jan 0.2 (-2.1 y/y) exp, -0.3 (-2.1 y/y) prior
11:00 CAD Net change in employment, thous Feb -50 exp, -129 prior
11:00 CAD Unemployment rate, % Feb 7.4 exp, 7.2 prior
12:30 USD Trade balance, $ bn Jan -38.2 exp, -39.9 prior
12:30 USD Import prices, % m/m Feb -0.8 (-13.4 y/y) exp, -1.1 (-12.5y/y) prior
12:30 USD Non-petroleum import prices, % m/m Feb -0.8 (-0.6 y/y) prior
13:55 USD Michigan consumer sentiment, index Mar-P 56.3 exp, 56.3 prior
00:00 Ministers meet in London
[B]The Risk Today: [/B]
[B]EurUsd:[/B] Closing above the 21-day moving average and breaking & consolidating above1.2750 resistance line are bullish signs. The currency pair is still encountering resistance above 1.2900, intraday correction to 1.2850. Above that level, further advance is expected towards 1.2990 (true trend turning point).
[B]GbpUsd:[/B] Sentiment still extremely bearish despite 4 day rally. Cable strength should be capped at 1.4050 but should USD selling increase 1.4060 break would open a test of 1.4230 (trendline resistance).
[B]UsdJpy:[/B] Expect corrective decline (touching 95.67) to dissipate quickly. Test of 98.90 trendline, then a move toward 99.20. Intraday support stands at 97.10…
[B]UsdChf:[/B] Market still abuzz over yesterdays SNB intervention. We doubt if traders will stand in the way of CHF weakness. With markets not able to move freely technical�s need to take a back seat. We expect range trading between 1.1800 - 1.2000.
[B]Resistance and Support:
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By[B] Peter Rosenstreich [/B]- ACM Advanced Currency Markets, Geneva, Switzerland