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Euro Hits Profit Taking As Week Begins

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Top Stories

  • G-20 Calls on EZ to shore up bailout funds
  • M3 expands more than expected
  • Nikkei down -0.14% Europe down -0.74%
  • Oil at $108/bbl
  • Gold at $1770/oz.

Overnight Eco

  • NZD Trade Balance (New Zealand dollars) (JAN) -199M vs. 184M
  • EUR M3 Money Supply 2.5% vs. 1.8%
  • EUR Private Loans 1.1% vs. 1.2%

Event Risk on Tap

  • USD Pending Home Sales (MoM) (JAN) expected at 1.0%
  • USD Dallas Fed Manufacturing Activity (FEB) expected at 15.9

Price Action

  • USD/JPY profit taking pulls it to 80.70
  • AUD/USD drifts to 1.0650 after probing 1.0700 earlier
  • GBP/USD very quiet at 1.5860
  • EUR/USD profit taking takes it 1.3425

It's been a very quiet opening to the start of week's trade with risk currencies seeing some profit taking in the wake of the G-20 summit over the weekend. The G-20 concluded its summit in Mexico City by reaffirming its commitment to fiscal restructuring of member nations while at the same time calling for an increase in resources to boost the funding for IMF and European bailout funds.

Most importantly the communique stated that," members have been actively engaged in taking the steps needed to safeguard the global financial system and to avoid adverse scenarios. At Cannes, our Leaders asked us to review the adequacy of IMF resources. This review is particularly important against the backdrop of continued downside risks. Euro area countries will reassess the strength of their support facilities in March. This will provide an essential input in our ongoing consideration to mobilize resources to the IMF."

The call for an expansion of EFSF and further buttressing of IMF capital base sparked a small risk on rally at the start of Asian trade with AUD/USD rising to 1.0700 and EUR/USD returning to last Friday's New York session highs of 1.3480, but the positive momentum did not last as risk FX saw some profit taking and currencies returned to their Friday closing ranges. Germany remains reluctant to commit further funds to support the regions peripheral sovereign debt markets and as such casts doubt in the market's mind as to the future efficacy of the EFSF and ESM programs.

The economic docket was extremely quiet with only money supply and loan data from the EZ on the calendar today. The data showed that money supply is expanding more rapidly than expected at 2.55 versus 1.8% eyed - not surprising given the massive balance sheet expansion by the ECB. The greater liquidity however, has not translated into more economic activity in the region as private loans fell to 1.1% from 1.2% forecast.

With only US Pending Homes sales on the docket during North American session, trading is likely to remain relatively quiet for the rest of the day as consolidation continues. The German Parliament is expected to take up debate on the Greek rescue package, but despite the posturing from politicians markets expect the deal to pass with an overwhelming majority of votes. If however, the Bundestag shows some serious opposition the bill, that could create a sudden headline jolt to the EUR/USD and push the pair quickly through the 1.3400 level. Even without any additional drama, the pair could test that level as the day proceeds as profit taking appears to be the order of the day.

FX Upcoming

Currency GMT EST Release Expected Prior
USD 15:00 10:00 Pending Home Sales (MoM) (JAN) 1.0% -3.5%
USD 15:30 10:30 Dallas Fed Manufacturing Activity (FEB) 15.9 15.3

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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