FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The dollar stabilized during the Asia session after yesterday’s losses. Newswires were largely silent, and the BoJ minutes from the Jan. 24-25 policy meeting were unremarkable. EURUSD traded 1.3589-1.3627, USDJPY 83.24-83.42. Asian equities were mixed, but the S&P 500 continues to advance, finishing +0.31% higher yesterday. The Philadelphia Fed manufacturing survey surged to 35.9 from 19.3 and details were strong. CPI rose slightly more than expected on both headline and core readings and jobless claims also surprised higher at 410k. Our team of analysts notes bad weather has made claims choppy since the start of the year, but we expect a downtrend to resume as the weather improves. Chicago Fed President Evans, a more dovish FOMC member and a 2011 voter, said that the current bond-buying program might be enough and more purchases may not be necessary after the program ends in June. Although he said he was encouraged by stronger data recently, he noted that the pace of improvement remains “disappointing.” The G20 meeting of finance ministers and central bankers gets underway in Paris today. A communique is expected on Saturday.
EUR
A key focus this morning will be the daily take-up at the ECB’s Marginal Lending Facility. The ECB is due to release the data at 0810 GMT. Yesterday’s announcement showed a dramatic increase on the day before. Liquidity demand amounted to EUR15.8 bn, levels not seen since June 2009. If usage does not decline significantly today, concerns about the health of the European banking system could intensify.
We remain negative on the euro given the relative growth outlook, and ongoing concerns about sovereign risk.
GBP
BoE MPC member Sentance offered further hawkish comments, openly criticising Wednesday’s quarterly inflation report. Sentance said global inflation is unlikely to quickly subside as implied in the report, and called for immediate rate hikes.
BoE Deputy Governor Tucker is due to speak at 1830 GMT. When he last offered his views on monetary policy in November, he was in the neutral camp. Tonight’s speech may reveal if his opinion has shifted in light of recent data and events.
TECHNICAL OUTLOOK
USDCAD 0.9745/12 next support.
EURUSD NEUTRAL Move above 1.3621 exposes 1.3696. Support at 1.3537.
USDJPY BULLISH Upside potential held at 83.98 ahead of 84.21/51 resistance zone. Near-term support is at 83.10.
GBPUSD BULLISH Stalled at 1.6187; move above the level would expose 1.6279. Support is defined at 1.6076.
USDCHF NEUTRAL Initial resistance at 0.9602, while support comes in at 0.9451.
AUDUSD BULLISH Break of 1.0075 has exposed 1.0137 next, while support defined at 1.0018.
USDCAD BEARISH Decline through 0.9832/20 support zone has exposed 0.9745/12 area. Near-term resistance at 0.9905.
EURCHF NEUTRAL Model has turned neutral; initial resistance at 1.3029 ahead of 1.3131, support at 1.2867.
EURGBP BEARISH Focus is on initial support 0.8356; break of this would expose 0.8332. Near-term resistance is at 0.8450.
EURJPY BULLISH Move above 114.01/94 would open up the way towards 115.42/68. Near-term support holds at 112.32.
SCHEDULE
Please visit GCI’s Economic Calendar for a schedule of market news and events.
