Global Markets:

  • Asian stock markets: Nikkei and Hang Seng are down 0.30 %, ASX dropped 0.50 %, Shanghai Composite gained 0.25 %
  • Commodities: Gold at $1273 (+0.25 %), Silver at $19.24 (+0.25 %), Crude Oil at $95.00 (-0.60 %)
  • Rates: US 10 year yield stands at 2.40

News & Data:

  • Australia Trade Balance -1.36B, Expected: -1.51B, Previous: -1.56B
  • Australia Retail Sales MoM 0.4 %, Expected: 0.4 %, Previous: 0.6 %
  • Bank of Japan keeps monetary policy steady by unanimous vote
  • BoJ pledges to increase monetary base at annual pace of 60-70 trillion Yen
  • BoJ board member Kiuchi proposed making 2 % inflation target a medium- to long-term goals, which was turned down
  • BoJ. Japan’s economy likely to continue recovering moderately
  • BoJ: Economic assessment unchanged; effect of tax hike remains
  • BoJ: Industrial output continnues to recover moderately as a trend, but making weak movements
  • BoJ: Private consumption remains firm as a trend, effect of sales tax hike gradually easing

FX Overview:

  • AUD – AUD/USD opened at 0.9340 in Asia and consolidated in a 0.9333-63 range for the rest of the session. Bids are resting at 0.9320 and 0.93; large stops beneath the big figure. To the topside, offers in front of the 0.9370 resistance level and then not much until 0.94. The Australian Dollar remains well-bid amid strong carry trade demand. Overnight cross flows were supportive with AUD/JPY and AUD/NZD posting fresh highs. The former seems to be heading for a test of 99.00 resistance, while the Aussie/Kiwi has not much tech resistance until 1.15. However, dealers in Asia mentioned that if Draghi should disappoint today, we could see heavy short covering in EUR/AUD which would eventually put the AUD/USD under pressure as well.
  • CAD – USD/CAD fell after the Bank of Canada maintained it’s neutral stance and there was no press conference with BoC Governor Poloz where he could have added some dovish remarks. The pair fell to a low of 1.0866, bounced from there and is now slowly approaching the 1.09 level. ADP and Initial Jobless Claims data could bring some volatility, but the pair is more likely to consolidate further ahead of the NFP release tomorrow. Bids noted at 1.0850, stops through 1.0840. Offers seen at 1.0930-40 from leveraged names and corporate supply noted pre-1.0950 as well.
  • EURFlows were light in the past two sessions and this is unlikely to change ahead of the ECB. Most analysts agree that there will be no QE announcement from the ECB today, but it is clear that words are not enough and Draghi must deliver something. An overview over the possible scenarios: 1) The ECB buys asset-backed securities (ABS) from the banks, which is likely to happen, 2) A rate cut, which would further weaken the Euro, something Southern Europe countries need badly, 3) the launch of TLTRO (Targeted Longer Term Refinancing Operations), which are designed to enhance the functioning of the monetary policy transmission mechanism by supporting bank lending to the real economy, 4) Full-scale quantitative easing (QE), 5) A lite QE and finally 6) do nothing. Draghi doing nothing would likely first lead to short covering in the Euro, but selling would eventually resume.
  • JPY – USD/JPY is consolidating around 104.80 after another round of profit-taking from specs and corporate selling. Larger bids noted between 104.50 and 104.60, which should hold today. Offers noted towards 105.20. Large option expiries today at 105.00 ($960 million), 105.15 ($570 million) and 105.45-55 ($3.5 billion).

Upcoming Events:

  • 06:00 GMT – German Factoy Orders (1.5 % MoM)
  • 11:00 GMT – Bank of England Interest Rate Decision
  • 11:45 GMT – ECB Interest Rate Decision
  • 12:15 GMT – US ADP Nonfarm Employment Change (220k)
  • 12:30 GMT – ECB Press Conference
  • 12:30 GMT – Canadian Trade Balance (C$1.00B)
  • 12:30 GMT – US Initial Jobless Claims (300k)
  • 12:30 GMT – US Trade Balance (-42.2B)
  • 13:45 GMT – US Services PMI
  • 14:00 GMT – US ISM Non-Manufacturing PMI (57.5)