Sleepy is a word one of my old colleagues Richard Franulovic of Westpac in New York used to describe the market’s trade overnight and it seems apt at least from an equity market point of view.
But sleepy is not a way we would describe trade on global FX markets as the Yen consolidates some of its recent weakness and European officials get zero out of ten for consistency with their proclamations on the the recent Euro moves. You’ll remember that yesterday we reported that Juncker had voiced his disquiet about the recent Euro strength. Overnight however Austrian Central Bank Governor Nowotny said the level of the Euro wasn’t a major concern. Importantly though as the Wall Street Journal reported Nowotny,
told journalists on the sidelines of a conference that he doesn’t see any long-term prospect of an upward trend in the euro’s exchange rate. “I think one should not overvalue short-term fluctuations of the exchange rates,” he said, adding “it’s a not a matter of major concern.” Mr. Nowotny added that the ECB doesn’t have a target exchange rate for the euro. Germany’s Economics Minister Philipp Roesler also disagreed with Mr. Juncker saying, “we absolutely can’t speak of an overvaluation [of the currency] at this point.”
The Euro’s move recently, the Yen’s move and the Fed’s unconventional monetary policy and its dampening effect on what would, given the relative economics, be a rallying trend in the US dollar is but the thin end of the wedge in what is a stealth currency war. We know that the Japanese are not acting by stealth with their aggressive weakening policies but many other nations are.
Indeed the Wall Street journal reported this morning that,
Earlier Wednesday, the first deputy chairman of Russia’s central bank, Alexei Ulyukayev, entered the fray, warning that budgetary policies were leading to major global imbalances that could lead to currency wars, saying “we are on the verge of very serious and confrontational actions in the sphere.”
If Japan is successful in reinvigorating the economy with the Yen weakness even if only for a small time or short period then look for other nations to follow.
On the data front overnight the key outturns were the flat result for US CPI, US industrial production at +0.3% was right on the money and the Fed’s Beige Book showed that the economy was growing at a “modest or moderate pace”
[B]Stocks[/B]
Boeing is under pressure with something like half its Dreamliners now grounded and this is weighing on the Dow while Apple is staging a bit of a recovery helping the Nasdaq. The S&P is around flat even after some good reports from the Goldman Sachs and JP Morgan which had pretty decent results in Q4 at least relative to analysts expectations.
With 30 minutes to go before the close the S&P 500 is up just 1 point at 1473 while the Dow is down 0.19% while the Nasdaq is up 0.39%.
In Europe mixed results with the FTSE down 0.22%, the Dax up 0.20% and the CAC up 0.29%. Milan was under pressure falling 0.73% while Madrid fell 0.23%.
In Asia yesterday the Nikkei was absolutely poll axed falling more than two and a half percent as the Yen recovered some lost ground and it became apparent that the Nikkei rally was not and is not a one way bet.
What you can see in the chart above of the 4 hours USDJPY v Nikkei performance since December is that the Nikkei trade IS the Yen trade.
[B]Global FX[/B]
USDJPY is down 0.41% over the past trading day at 88.44 but off the low of 87.77. The Euro is down just 0.09% at 1.3291 mid range for the past 24 hours which saw a low of 1.3256 and a high of 1.3324. GBP was under pressure again and looks to us to be slowly slipping lower but in a sustainable and trend manner. Off 0.38% on the day GBP sits at 1.6002 at the moment. The Aussie remains roughly unchanged at 1.0563.
Looking at the USDJPY even with the sell off over the past two days from the high USDJPY has still not had what might be called a “meaningful” consolidation of the 10 big figure uptrend. The break of 87.90 overnight I thought might precipitate a deeper move but it hasn’t come yet although when I look at the set up for my indicators in the chart below it still appears that lower levels beckon.
The Euro pulled up at the lows of the previous day as you can see in the 4 hour chart below. A break of last nights low is likely to be a signal that it is headed a big figure or so lower.
The Aussie is too boring for me at the moment as it dances on the spot becalmed by a lack of drivers. Of course today’s employment data could get things going and Chinese GDP data tomorrow. A break of of 1.0580 or 1.0520 might reward short term.
[B]Commodities[/B]
Crude was up after a surprise draw in stocks shown in the EIA data overnight (-913000 Bbls versus +2000000 expected) as well as the attack on the BP/StatOil facility in Algeria.
I thought that Nymex crude was going lower on the basis of the chart above, indeed I still do, but with Crude up 0.98% to $94.19 overnight the chance that I am wrong is growing.
Gold and Silver are roughly flat with the yellow metal mid range within the 3 month down trend it is in. Silver is still wedging itself toward some sort of break but we are not there yet.
[B]Data[/B]
Unemployment in Australia is out today and I learnt over 20 years ago never to try to predict the outcome of this one. The market is however looking for unemployment to rise to 5.4% and a ridiculously tiny rise of 2300 on average according to FXStreet. Tonight we’ll be watching the Philly Fed and jobless claims in the US.
Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can
NB: Please note all references to rates above are approximate and should not be used for trade reference.