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USD
Is the USD cracking again?
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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. |
|
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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. |
|
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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. |
|
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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. |
|
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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
RBAs 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. |
|
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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 Singapores 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 |
|
| Europes 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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