Personal Finance - Standard Chartered Bank Market Matters

Foreign Exchange Market Report
FX Snapshot 31 Jan 2005

 
Personal Finance - Standard Chartered Bank USD
Is the USD cracking again?
  • There are signs that the USD index may be starting to crack again. The coming week will be crucial in determining the multi-week outlook. On the data front, we see the important ISM business confidence surveys and the labour market report, which will give a good indication as to how the economy is performing. Meanwhile, the Fed will likely hike interest rates by 25bps, consistent with a continued ‘measured’ hiking stance. Finally, at the end of the week, the focus will be on the G7 meeting on Friday/Saturday. Comments from different quarters suggestive that the Chinese and Malaysian authorities are actively considering changes to FX policy are likely to reduce the pressure for a change in the wording of the G7 communiqué. Overall, volatility is expected to pick up this week.
    Personal Finance - Standard Chartered Bank EUR
    Business confidence rises
  • German business confidence data showed a slight improvement in January, led by improved expectations about the future. This is clearly more to do with the improved international environment than a belief that the domestic economy is set to recover. However, growth, regardless of its source, should help stabilise the EUR.
    Personal Finance - Standard Chartered Bank JPY
    Asia FX sentiment to dominate JPY movements
  • Economic data out over the past week has been slightly disappointing, but the focus will be more on perceptions of the likelihood of any change to the currency pegs in Asia. As noted above, speculation of such a change is building markedly and we expect both Malaysia and China to allow a modest appreciation of their currencies in the first half of the year. This will ultimately put further upward pressure on the JPY, but in the near-term sentiment rather than reality is more important.
    Personal Finance - Standard Chartered Bank GBP
    Stronger growth buoys GBP
  • Sterling benefited from strong economic growth numbers last week. Q4 GDP rose a much stronger than expected 0.7% q/q. While the y/y pace decelerated, this was still enough to support the pound. According to the minutes released for the Bank of England January monetary policy meeting, all members of the committee agreed to leave rates on hold, although they noted that house price data had been more resilient than expected. This may put expectations for a rate cut on the backburner for now. BOE meets again this week and no rate move is anticipated.
    Personal Finance - Standard Chartered Bank AUD
    Inflationary threat reinforces upside interest rate risks, but not this week
  • Consumer price inflation rose to 0.8% q/q in Q4 from 0.4% in Q3. This is not expected to alter the RBA’s thinking when it meets this week. However, this was significantly stronger than expected and is likely to raise expectations that the RBA is still in hiking mode. Together with stronger commodity prices, this should help to support the AUD.
    Personal Finance - Standard Chartered Bank SGD
    MAS will increasingly be the focus
  • The significant deceleration in inflation in January will have been noted. As we move towards the Monetary Authority of Singapore’s semi-annual policy meeting in April, such issues may raise speculation of a shift back to a neutral stance, as we expect, especially in a backdrop of weaker growth. This still leaves scope for the SGD to appreciate further against the USD, but likely at a slower pace than in recent times.

    Key Levels
    Currency Support Resistance
    EUR/USD 1.2855** 1.2640*** 1.3300** 1.3440***
    USD/JPY 100.00**** 95.00*** 105.20*** 106.20****
    GBP/USD 1.8435*** 1.8200**** 1.9000**** 1.9415**
    AUD/USD 0.7385** 0.7215*** 0.7845**** 0.8005***
    USD/SGD 1.6200** 1.6000**** 1.6680*** 1.6915****

    Key: (*)-Minor; (*****)-Major

    Key Events
    Event Day Implication
    Singapore Q4 unemployment Monday Labour market to stabilise as retrenchments fade
    Japan Dec housing starts Monday  
    Eurozone Jan CPI estimate Monday Inflationary pressures easing for now
    Eurozone Jan confidence indices Monday Broad-based, but modest, improvements likely
    UK Jan consumer conf/CBI survey Monday Improvement in like-for-like retail sales
    US Dec pers income/spending Monday Significant acceleration, but inflation to remain benign
    US Jan Chicago PMI Monday A slight softening in business confidence expected
    Australia Dec trade balance Tuesday  
    Europe’s Jan manufacturing PMI Tuesday  
    UK Dec credit extension Tuesday Likely to be mixed
    US Jan ISM manufacturing survey Tuesday Slight softening expected
    Australia RBA rate decision Wednesday No change expected, although bias to tighten
    Germany Jan unemployment Wednesday Hartz IV reform to lead to sharp rise in unemployment
    German Jan IFO indices Wednesday Modest pick-up expected
    EU Dec PPI Wednesday  
    US FOMC announcement Wednesday Measured rate hikes to continue (+25bps)
    US Jan ISM non-manufacturing Thursday Slight weakness seen
    Japan Dec leading economic index Thursday Likely to hold steady
    Germany Dec factory goods orders Friday Rebounding from November slump
    US Jan employment report Friday Slight improvement, but hardly dramatic
    G7 meeting Fri/Sat Communique likely unchanged but watch China

    Recent FX Performance (%, +ve = USD decline)
    Currency Past 1 Week 1 Month 3 Months 1 Year
    EUR/USD -0.56 -3.63 2.82 4.50
    USD/JPY -0.62 0.96 4.45 2.94
    GBP/USD 0.35 -2.41 2.69 2.92
    AUD/USD 1.36 0.08 3.94 0.68
    USD/SGD 0.36 0.42 2.03 3.66

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