The economic calendar was packed with Central Bank events, including Fed’s Powell, ECB’s Lagarde and BOE’s Carney. The net effect, after all said and done, is a sense that these policymakers did a great job at sounding non-committal and sticking to the familiar mantra. What does this mean? It means there was little meat in the bone, a lack of substance or new surprises in the remarks they had prepared. As a consequence, the movement in currencies this week continues to be rather dull in nature, with the US Dollar a touch softer, even if that has not acted as a catalyst to see buying in the Euro, which remains in free-fall. Watch the EUR index closely as it nears a key level where long inventry building is a real possibility.
The Kiwi, however, is the exception, marked up aggressively by algo activity and the unwinding of shorts on the aftermath of a more hawkish-than-expected RBNZ. The Aussie, meanwhile, saw buy-side flows re-emerge but at a much slower pace as the positive groove in equities feeds through. The lower reported rate of new NCoV infections by China (even if numbers manipulated), or expectations of some factories in China to soon re-open are factors supporting equities. Not to forget, the Fed’s balance sheet expansion via money market operations, alongside the boost in Trump ratings to win this year’s presidential race after the Iowa caucus fiasco is also an aid.
This recovery in equities is causing the Yen and Swissy to see sell-side flows dominate this week, but the setback in the currencies is still under a bullish context when analyzing the aggregated daily flow. The Sterling is one of the clear beneficiaries from the current state of affairs, with its recovery more to do with a technically-inspired re-loading of longs at a critical liquidity area than any particular fundamental catalyst, as the EU-UK trade talks still the key driver with the outlook as tricky as it was during the aggressive sell-off in the Pound earlier this month. Lastly, the Canadian Dollar remains firmer but on the daily the currency remains structurally bearish.