Global Markets Overview:

  • ECB’s Draghi: Euro exchange rate becoming increasingly relevant in our assesment of price stability
  • Draghi: Real interest spread between euro zone and the rest of world will probably fall, putting doward pressure one exchange rate
  • Draghi: Risks of deflation are quite limited, but the longer inflation remains low, the higher the probability of such risks emerging
  • Draghi: Any material risk of inflation expectations becoming unanchored will be countered with additional monetary policy measures
  • Asian equity markets are a sea of red this morning
  • Japanese Nikkei is down 3 % on the day, while the Shanghai Composite lost 0.50 %
  • Australia’s ASX dropped 1.30 % and the Hang Seng Index lost 1 %
  • US 10 YR yield stands at 2.644; Gold at $1371 (-0.10 %)

FX Flows/Orders:

  • Flows in Asia were light as the sudden switch to risk-off overnight caught traders by surprise
  • Plenty of stops cleared in USD/JPY during the US trading session; the pair is now consolidating after profit-taking from speculators and demand from an US bank provided some support
  • Japanese names were buyers at the Tokyo open, but very cautious as the Nikkei is down 3 %
  • Good bids reported at 101.50; system funds have sell stops clustered around 101.25
  • Dealers are not seeing much on the order book for EUR/USD – bids are accumulating in the lower 1.38s, while offers are lined up at 1.3890 and in better size 1.3910 (mostly for leveraged funds)
  • Bids in AUD/USD at 0.90, but bank traders feel the stops through 0.8990 and 0.8980 will get hit as we head into the London session

Market Sentiment:

ECB’s Draghi mentioned on March 6th that the Euro is not a policy target, but obviously it became a worry for them as we were slowly approaching the 1.40 level in EUR/USD. Not really a surprising move as the southern EZ countries are still trying to recover and  a strong Euro is the last thing they need right now.

Australia’s domestic data supported the Australian dollar, but the gloomy mood in markets could lead to a renewed decline. Global investor mood turned sour again amid on-going tensions in Ukraine and Sunday’s Crimea referendum could spark even more instability. Market participants are likely to cut risk further ahead of the weekend, covering risk-on trades and fueling demand for JPY and CHF.

Upcoming Events:

  • 07:00 GMT – German CPI / MoM 0.5 % f/c – YoY 1.2 % f/c
  • 08:15 GMT – Swiss PPI / MoM -0.1 % f/c – YoY -0.5 % f/c
  • 09:30 GMT – UK Trade Balance / -8.60B
  • 10:00 GMT – Euro Zone Employment Change / 0.0 % QoQ
  • 12:30 GMT – US PPI – MoM 0.2 %
  • 13:55 GMT – US Michigan Consumer Sentiment / 82.0 f/c