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Intermarket:
- SP Futures 3817 (-0.16%)
- EUSTXX 3594 (-0.08%)
- Crude Oil 56.10 (+0.72%)
- US 10YR 1.13 (+2.35%)
- EurUsd 1.2016 (-0.16%)
- UsdJpy 105.15 (+0.12%)
- DAX 13915 (-0.01%)
Global risk sentiment may be range bound ahead of today’s BOE policy decision and tomorrow’s US labour market report. Prices are softer into today’s European session despite upbeat earnings from Alphabet, Amazon, EBay and PayPal. To note, volatility is rising in the equity space, so caution is warranted as corrections may materialise.
Enter the Bank of England: focus will be on forward guidance and negative rates. Since the last meeting, the economy remains weak but most economic reports surprised to the upside. Consensus is for no change in rates or QE but the Bank has been exploring the possibility of negative interest rates for the past few months. For now, GBP remains resilient as Britain is leading the world in getting their citizens vaccinated and PM Johnson even said that restrictions could be eased soon. If the Bank downplays negative rates, GBP should remain sustained. If negative rates gain traction, GBP could come under pressure.
In other news, companies are hiring near pre-pandemic levels in NZ and as such, the RBNZ has no further need to ease policy this year and this combination should keep NZD supported.
For instant updates, follow FCI Markets on Twitter
Intermarket:
- SP Futures 3817 (-0.16%)
- EUSTXX 3594 (-0.08%)
- Crude Oil 56.10 (+0.72%)
- US 10YR 1.13 (+2.35%)
- EurUsd 1.2016 (-0.16%)
- UsdJpy 105.15 (+0.12%)
- DAX 13915 (-0.01%)
Global risk sentiment may be range bound ahead of today’s BOE policy decision and tomorrow’s US labour market report. Prices are softer into today’s European session despite upbeat earnings from Alphabet, Amazon, EBay and PayPal. To note, volatility is rising in the equity space, so caution is warranted as corrections may materialise.
Enter the Bank of England: focus will be on forward guidance and negative rates. Since the last meeting, the economy remains weak but most economic reports surprised to the upside. Consensus is for no change in rates or QE but the Bank has been exploring the possibility of negative interest rates for the past few months. For now, GBP remains resilient as Britain is leading the world in getting their citizens vaccinated and PM Johnson even said that restrictions could be eased soon. If the Bank downplays negative rates, GBP should remain sustained. If negative rates gain traction, GBP could come under pressure.
In other news, companies are hiring near pre-pandemic levels in NZ and as such, the RBNZ has no further need to ease policy this year and this combination should keep NZD supported.
Looking Ahead: beyond BOE, we will get US initial jobless claims ahead of tomorrow’s NFP report. Employment in the Manufacturing and Services PMI improved in January, so jobless claims may reflect the improvement.
Matters that Matter:
• Bank of England to focus on recovery hopes even as lockdown drags on
• Democratic-controlled US House of Rep approved a budget outline that would allow them to pass President Biden’s proposed $1.9trln coronavirus aid plan without Republican support.
• Fed Mester and Evans say more fiscal help needed.
• U.S. Treasury’s Yellen to meet financial regulators Thursday to discuss volatility
• Australia’s exporters weather China squall, find new harbours
• EU rebuffs UK demand to soften N.Ireland Brexit trade terms
• Italy’s Draghi seeks party backing to end political turmoil
• New Zealand Dec Building Permits +4.9% from +1.2%
• New Zealand Feb Prelim ANZ Activity Outlook 22.3 from 21.7
• New Zealand Feb Prelim ANZ Business Confidence 11.8 from 9.4
Majors 1-Day View:
USDJPY
- Prices traded sideways on Wednesday to post an “inside day”. However, the trend of higher daily lows continues and as such, the bias remains cautiously bullish for today.
- Large opex today and tomorrow at 105.00 making price “sticky”
- US yields supportive.
EURUSD
• Despite 1.2000 being defended twice in the past 2 sessions, the trend of lower daily highs remains intact and pressure remains to the downside. As such, the outlook remains bearish for Thursday.
• Bids at 1.2000 holding for now, bias lower.
• Offers reported at 1.2050.
AUDUSD
• Prices posted a narrow range “inside day” on Wednesday signalling a lack of momentum. However, a failed rally in Asia trade suggests a cautious negative bias today and we prefer to sell rallies.
• AU stronger as US House passed relief bill.
• Good trade data and risk-on keeping prices supported.
GBPUSD
• Prices traded sideways yesterday, posting the second little changed close in a row. However, sellers returned during Asia trade, prices posting fresh lows on the week. As such, the bias remains cautiously negative today ahead of BOE.
• BOE in focus: outlook on recovery and negative rates key.
• Brexit teething problems surfacing.
FX Relative ATR Grid
Comment: Volatility declined across the board on Wednesday, with the entire grid in a volatility contraction (with the exception of NZD). This would seem unsustainable and we would expect volatility expansions today.
FX Relative Strength Grid
Comment: going into Thursday, NZD, CAD and USD strength vs. JPY weakness are the stronger signals.