USD
Dollar performance was mixed during the Asia session with the greenback holding on to Friday’s gains against the euro, but surrendering some ground to the yen. The Nikkei-225 is currently up more than +1.1%. Indeed Asian equities are broadly higher after official confirmation on Friday evening that Egypt’s Mubarak has stepped down as president and has ceded control to a military council. EURUSD traded 1.3501-1.3554 and USDJPY traded 83.15-83.57. The big mover overnight was AUDUSD, although this seemed to be driven more by a general risk-on theme rather than the stronger than expected Australian lending data or the exceptionally strong trade data out of China. News of Mubarak’s departure helped the S&P 500 finish up +0.55% on Friday, and contributed to a fall in WTI crude which closed over $1/bbl lower on the day. The University of Michigan confidence index in early February came in slightly ahead of expectations at 75.1 (cons. 75.0, prev. 74.2). There are no US economic data releases scheduled for today. We remain bullish on the dollar given the trend towards stronger US data, and given renewed jitters in Eurozone sovereign bond markets.
EUR
A German government spokesperson confirmed that ECB Governing Council member Weber intends to step down on April 30 as President of the Bundesbank, and that his successor will be named this week. The President of the Bundesbank has a seat on the Governing Council of the ECB.
A delegation of EU, IMF, and ECB inspectors to Greece approved the latest tranche of financial aid amounting to ?15bn. The head of the IMF’s mission to Greece, Thomsen, said that the austerity program is “on track but it will not remain on track without a significant, broad-based acceleration of reforms”. The EU’s representative, Deroose, said that the prospects for Greece returning to bond markets in 2011 are “rather bleak”.
JPY
Japan’s Q4 GDP contracted by less than expected, declining by -0.3% q/q (cons. -0.5%). It marks the first quarterly contraction since Q3 2009.
GBP
Attention will focus squarely on inflation data this week, with January’s CPI report due on Tuesday, followed by the quarterly inflation report and subsequent press conference on Wednesday. Friday’s stronger than expected PPI numbers for January suggest that inflationary pressures continue to build, and our UK economist is with the consensus looking for CPI to come in at +4.0% y/y.
AUD
Australian home loan lending increased by +2.1% m/m in December, ahead of consensus expectations of only a +1.0% m/m increase.
CAD
The CAD received a boost after December’s trade balance unexpectedly registered the biggest surplus since October 2008. Exports by volume rose +9.7% m/m, suggesting that Canadian exporters are learning to cope with the stronger CAD, which somewhat erodes an obstacle to further rate hikes from the Bank of Canada.
TECHNICAL OUTLOOK
EURUSD 1.3482 support.
EURUSD NEUTRAL Lower boundary of the 1.3509/1.3482 support zone holds. Initial resistance at 1.3621.
USDJPY BULLISH Stalled in front of 83.68; push above the level would expose 84.51. Support at 82.71.
GBPUSD BULLISH As long as support at 1.5922 holds, expect recovery towards 1.6138 and 1.6186.
USDCHF BULLISH Focus is on 0.9784 ahead of 0.9852. Support is at 0.9575/24 zone.
AUDUSD NEUTRAL Model is neutral; 1.0137 and 0.9961 mark the near-term directional triggers.
USDCAD BEARISH The pair targets 0.9832/20 support zone; break through this would expose 0.9712. Resistance at 0.9898 intraday high.
EURCHF BULLISH Pressure on 1.3206; next resistance at 1.3287. Support at 1.3086.
EURGBP BEARISH Break of 0.8420 would expose 0.8389/77. Near-term resistance is at 0.8530.
EURJPY BULLISH Resistance zone is at 114.01/94. Initial support lies at 112.06.
SCHEDULE
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