OPENING COMMENT
The recent decline in the USD has opened up an inflated amount of speculation over today’s G20 start, with talk circulating that the USD will be given mention. However, many official comments have rejected these rumors and say that FX will not be on the official agenda. The antipodeans have once again been outperforming, albeit marginally, in early trade, with the Australian Dollar leading the way on the back of strong new home sales data and a praised review from the RBA’s Financial Stability Review of the domestic financial system throughout the global crisis. The Loonie has not fared as well despite sharing the commodity appeal, with the single currency weighed down by Wednesday’s comments from central banker Longworth who said that persistent strength in the CAD remained a risk to growth. The Yen is actually the strongest currency on the day thus far, with the currency finding some additional bids after the local holiday. In the UK, an article in the Telegraph has stirred a bit of a commotion after saying that the BOE has called a crisis meeting for experts. However, this is somewhat overdone and exaggerated with the central bank getting ready for a seminar with all of London’s major economists next Tuesday. ECB Liikanen was also on the wires after being quoted in the FT saying that the central bank is in no hurry with regard to an exit strategy.
While there was no official change in the Fed language towards the interest rate outlook on Wednesday, the fact that mention was given to a pick-up in the economy, seems to have been enough to inspire some USD buying. Yesterday’s close could be a start to something for USD bulls, but as has been the pattern of late, market participants have been very happy to re-sell the buck on any form of a rally. It remains to be seen whether we can indeed call this a USD rally. Another day of follow through for the greenback on Thursday will help to confirm. As always, it will be important to pay close attention to the correlated equity and commodity markets for additional insights into direction. Looking ahead, the European calendar is light, with the only key release coming in the form of German IFO (96.6 expected) due at 8:00GMT. Although it is early, US equity futures could be starting to paint a picture for the day ahead, already tracking lower by 0.50%.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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