USD
Conviction was generally lacking during the Asia session given the shortage of news headlines and economic data releases, though remarks from the SNB supported the Swiss franc. EURUSD traded 1.3476-1.3540, USDJPY 83.69-83.88. Asian stocks are moderately ahead at the time of writing, although the S&P 500 finished down -0.32% earlier. US retail sales rose less than consensus estimates at +0.3% m/m in January. December was revised down fractionally, with total sales at +0.5% instead of +0.6%. But the soft headlines masked a decent gain in the components that feed into GDP. In other releases Empire manufacturing, NAHB housing market index and business inventories were roughly in line with consensus. That said, after retail & inventories data, Q4 GDP is likely little revised as data released since the initial estimate (of 3.2% growth) imply little net revision, with stronger exports offsetting weaker consumption. The latest FOMC minutes are due and we expect some adjustments in the central tendency projections to the tune of lower unemployment and higher inflation, with the tone of the minutes expected to be consistent with recent Fed comments.
EUR
ECB Governing Council member Quaden said the ECB’s exceptional liquidity measures are still necessary. The timing of this remark is significant given that it comes ahead of the ECB’s next policy meeting on March 3, where the question of whether to phase out exceptional liquidity support is due to be debated.
Eurozone GDP came in slightly below consensus at 2% y/y although this was largely offset by strong ZEW surveys. EURUSD continues to be driven by other factors at the moment however and any significant developments from Eurozone policymakers are likely to drive markets more than the core prints until the leaders’ summit in March.
CHF
Remarks by SNB Chairman Hildebrand in a newspaper interview lent some support to the CHF, although the move was exaggerated by the triggering of stop-loss orders. He said there are no miracle solutions to the strong Swiss franc and even pointed to one of the advantages, noting that although inflationary pressures have increased, these have been dampened by the strong currency. He observed that inflation is still very low, and that price stability is ensured in the near term. Nevertheless, he also noted that expansive monetary policy cannot be maintained in the long term, and that if the latest inflation forecast materialises, rates would have to rise sooner or later.
GBP
Following another above-target CPI print, the latest letter from BoE Governor King to Chancellor Osborne was also published and one quote stood out, where King wrote that “every member of the Committee is conscious that there are large risks in both directions. And no one should be in any doubt that when the balance of risks requires it, every member of the Committee is determined to act to adjust policy in order to bring the risks back into balance”. This suggests that the vote at the Feb. meeting could have been close, so next week’s minutes will be very revealing.
SEK
The Riksbank hiked rates by 25bp to 1.5%. which was broadly in line with consensus. Policymakers also offered a fairly hawkish statement saying that underlying growth prospects are strong and rates need to be raised more quickly in the future. They also fractionally raised their repo rate trajectory. We continue to favour SEK on the back of Riksbank hawkishness.
TECHNICAL OUTLOOK
EURGBP 0.8332 support.
EURUSD NEUTRAL Initial support is at 1.3428, move below this would expose 1.3364. Initial resistance at 1.3621.
USDJPY BULLISH Rise through 83.68 exposes 84.51. Support at 83.10.
GBPUSD BULLISH Recovery through 1.6138 opens up the way towards 1.6186 and 1.6279. Support is defined at 1.6008.
USDCHF BULLISH Resistance is at 0.9776/84 zone, break through this area would expose 0.9852 next. Support is at 0.9575.
AUDUSD NEUTRAL Move below 0.9961 exposes 0.9897 ahead of 0.9804. Resistance comes in at 1.0075 for now.
USDCAD BEARISH Support at 0.9832/20 zone holds; break through this would expose 0.9712. Near-term resistance at 0.9918.
EURCHF BULLISH Resistance is at 1.3206 while support lies at 1.3015.
EURGBP BEARISH Decline through 0.8389/77 support zone exposes 0.8332. Near-term resistance is at 0.8449.
EURJPY BULLISH Eyes 113.44; a break here would expose 114.01/94 resistance area. Support lies at 112.06.
SCHEDULE
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