Top Stories
- Euro seesaws arounf 1.3100 as auctions prove mixed
- Azumi - watching rates carefully
- Nikkei off -0.83% Europe up 0.97%
- Oil at $101.50/bbl
- Gold at $1655/oz.
Overnight Eco
- AUD Westpac Consumer Confidence (APR) -1.6% vs. -5%
- AUD Home Loans (FEB) -2.5% vs. -3.6%
- JPY Machine Orders (MoM) (FEB) 4.8% vs. 0.7%
- NZD NZIER Business Opinion Survey (1Q) 13 vs. 0
Event Risk on Tap
- CAD Housing Starts (
MAR
)
Price Action
- USD/JPY find support at 80.50 and rebounds to 80.80
- AUD/USD capped at 1.0300
- GBP/USD rally above 1.5900 stalls
- EUR/USD initial rally above 1,3100 capped by auction
results
Risk FX seesawed in Asian and early European session but
eventually traded higher in the wake of Italian and German bonds
auction that saw the spread in yield between the periphery and the
core narrow slightly. Despite the fact that Italian auctions went
off at higher yields than the period prior, while German auction
was essentially uncovered, risk currencies overcame credit concerns
and moved higher as the day progressed with EUR/USD making its way
through the 1.3150 level by midmorning Frankfurt trade.
Italy sold 3 Billion of 91 BOT at 1.249% versus 0.492% last time
and also 8 Billion 361 BOT at 2.84% versus 1.405% the auction prior
and the materially higher rates reflected renewed concerns about
credit for EZ third largest economy. Germany meanwhile was not able
to sell the full 5 Billion of 10 year bonds selling only 3.87
Billion at the current rates of 1.75%. The markets sold off
initially on the news but quickly recovered their composure as
credit spreads in the region stabilized.
Meanwhile USD/JPY slid towards the 80.50 at the start of Asian
session trade as risk aversion flows dominated early, but quickly
stabilized and started to rally towards 80.80 after Bank of Japan
announced that it may increase its asset buying program by 10
Trillion yen on April 27th. Japan's Finance Minister Jun Azumi
stated that official see signs of economic rebound but also noted
that they were fully aware of the impact of yen strength on the
country's export dependent economy. Also Mr. Azumi said that
policymakers will not be swayed by every movement in the FX markets
he nevertheless warned that their watching the market with great
interest.
Japanese authorities are clearly becoming uncomfortable with the
recent strengthening of the yen, as USD/JPY has lost nearly 4 yen
in less a month. Most market watchers believe that today's comments
were an effort at verbal intervention ahead of the 80.50 barrier
and that the BOJ could physically intervene if the pair approaches
the key 80.00 level.
Yet intervention may prove as futile this time as it has in the
past if US long term yields continue to drift lower. If Japanese
authorities truly want to arrest the appreciation in yen they will
have to commit to large QE program in order to match the dilution
in currency stock coming from the Fed. Today's announcement of
possible additional 10 Trillion yen in QE is only start if the BOJ
wants to defend the 80.00 level successfully.
With no economic data on the calendar in North American trade
currencies are likely to take their cue from equities. After a step
selloff yesterday risk assets may be due for some short covering
action and if the price action in stocks proves supportive the
EUR/USD could target the 1.3200 level as concerns over EZ credit
ease and late shorts get squeezed further.
Note: I will be away until Monday the 16th of April.
FX Upcoming
| Currency |
GMT |
EST |
Release |
Expected |
Prior |
| CAD |
12:15 |
8:15 |
Housing Starts (
MAR
) |
|
201K |