Market Open - • Syriza wins Greek elections with 149-151 seats, MNI reports 151-seat majority, Tsipras to become prime minister, form government – Media. • BoJ Gov Kuroda (in Davos) – Not concerned with EUR/JPY depreciation, eyes Japan growth of @2% in ‘15 - Reuters. • BoE Gov Carney (in Davos) – Reckless to assume central banks will always be there to come to the rescue, UK inflation back to target within 2-years –RTRS. • Bank of England’s Forbes suggests need for earlier rate rise, expresses optimism about global economic outlook. • ECB Pres Draghi – EZ governments need to redouble reform efforts –WW magazine. • Buba Weidmann – In interest of Greece to reform, risk of deflation low, monetary policy options have been used – ARD TV. • ECB Coeure (in Davos) – EZ political foundation weakened by weak growth, entrenched unemployment, EZ governments must do more – Reuters. • Dutch CB Knot – Opposed ECB decision on QE – Dutch TV. • BoJ Policy Board December minutes – Members highlight risks – commodities, Greece, market volatility, Japan business CAPEX-wage hike plans, consumer sentiment, energy price fall positive but downward pressure on CPI. • Japan Dec trade deficit Y660.7 bln, Y740.3 bln eyed, exports surge 12.9% y/y, best pace since Dec ’13, imports still high, +1.9%, exports to US +23.7%, China +4.3%, rest of Asia +11.0%. • NZ December PSI 56.5, Nov rev down to 54.7, growth in 4 of 5 sub-indices. Looking Ahead - Economic Data (GMT) • 09:00 DE Jan Ifo business climate index, 106.3 eyed; last 105.5. • 09:00 DE Jan Ifo current conditions index, 110.7 eyed; last 110.0. • 09:00 DE Jan Ifo expectations index, 102.5 eyed; last 101.1. • 15:30 US Jan Dallas Fed mfg business index; last 4.1. Looking Ahead - Events, Auctions (GMT) • Australia Day, India Republic Day holidays. • N/A EuroGroup meeting in Brussels. • N/A Buba Nagel, Buch speeches in Dusseldorf (14:00/15:30). • N/A Germany E1.5 bln 12-mo Bubill, France BTF 3/6/12-mo bill auctions. • 17:00 ECB/Luxembourg CB Reinesch chairs Luxembourg forum. Currency Summaries USD/JPY and the JPY crosses showed little direction in thin Asia trading. The action was almost entirely on the back of EUR flows, supportive for USD/JPY but no so for the crosses. USD/JPY see-sawed between 117.26-83, down initially from 117.76 to the low on EUR/JPY sales, back up to the high as EUR/JPY bounced and then steadying later around 117.59 where the 200-HMA comes in and a pivot of sorts. Japanese bids were also noted from @117.50 on the initial move down and heavy at 117.25. Bids remain to 117.00 and offers ahead of 118.00. Stops are eyed both sides of these levels. EUR/JPY fell from 131.58 to 130.16 with the anti-austerity Greek Syriza Party winning the election and likely to take the reins of government. Short-covering saw a rebound to 131.88. Conditions were extremely thin. Most now eye choppy trading between 130-132 till Europe returns. The bias remains down and stops could be large sub-130.00, a level tipped to have optionality. GBP/JPY see-sawed between 175.68-176.95, AUD/JPY 92.14-93.08 and NZD/JPY 86.86-87.59 with all also on the back-foot, the latter two on more dovish central bank expectations. EUR/USD opened at 1.1185 after closing Friday at 1.1205. The reason for the gap lower was exit polls showing the Greece anti-austerity Syriza Party doing better than expected. Subsequent reports out of Greece indicated Syriza would win a ruling majority with 150 seats or more. EUR came under broad pressure with EUR/USD down to 1.1098 to trigger stops and take out 1.1100 option barriers. Heavy EUR/JPY sales helped fuel the move. Once stops and barriers were out of the way, EUR/USD staged a vicious reversal to 1.1202 to fill the early gap. It fell back a bit before steadying. It will be interesting to see how Europe reacts to the Syriza victory as markets appeared quite sanguine Friday (Greek stock market up 6.0%+). The trend for EUR/USD remains decidedly down and rallies will continue to be viewed as selling opportunities and option barriers at 1.1000 now in focus. Only a break above 1.1250 will ease downward pressure. GBP/USD punched down to 1.4972 alongside EUR/USD early before returning to a 1.4988-1.5027 range. EUR/GBP saw a fresh low of 0.7406 before bouncing to 0.7510. USD/CHF see-sawed nervously between 0.8765-0.8823 with liquidity still virtually nil. EUR/CHF likewise saw to-fro action between 0.9788-0.9870. AUD/USD opened at 0.7904 and immediately came under pressure in sympathy with EUR/USD. The strange aspect to the move was that AUD also weakened against EUR. AUD/USD fell to 0.7850 before buyers returned and sent it back up towards its opening level to 0.7905. The Australia holiday ensured thin trading and whippy price action. Bearish AUD sentiment has intensified with the market more convinced the RBA will ease rates when they meet in February. This is especially so with the Australian economy facing similar challenges to its Canadian counterpart. The RBA also does not want AUD to become overly popular with yield seeking investors. The close below support at 0.7945 Friday targets 0.7700, a level dating back to July ‘09. NZD/USD opened in Asia at 0.7445 with NZD the worst performing currency last week, even losing ground to EUR and CAD despite ECB and Bank of Canada easing. NZD/USD came under pressure in early Asia again with the better than expected showing by the Greek anti-austerity Syriza Party sending EUR/USD lower and AUD/USD and NZD/USD down with it. NZD/USD traded down to 0.7407 before bid ahead of 0.7400 steadied the market. The RBNZ meets Wednesday and the market is expecting the RBNZ to at least soften their tightening bias with some suggesting they may even deliver a neutral statement. The consensus view is that the RBNZ will push out the next rate hike and sound a bit less certain than previously USD/AXJ were mostly better bid with plunges in EUR-AUD and risk-off sentiment weighing on the bloc. USD/CNH and USD/CNY continued to power up on swaps, strong corporate interest, real money buying and talk, maybe spurious, of an RRR cut. USD/SGD rallied towards 1.3500 but ran into profit taking. USD/MYR traded sideways but firm above 3.60. USD/IDR and USD/PHP were helped out by profit taking but yield plays continue to hinder. USD/THB was stuck around 32.60 ahead of the central bank policy announcement Wednesday and a possible rate cut. Other Asset Markets The Nikkei opened gap down at 17,285.71 on the likelihood of a Greek Syriza victory. It did manage to rally from this early low to 17,471.94 in the afternoon. At 17,461.59, it is down 50.16 points or 0.29% on the day. Asia ex-Japan is mixed with the the Hang Seng off 0.11%, the STI 0.22% and KOSPI just below par on the day. The Shanghai Composite is just above par and the NZX50 closed up 0.4%. JGBs were mixed with cash out to the 10s better whilst long-dated issues tanked. The curve steepened considerably. Euroyen futures did little in low-volume trading. The yield on the benchmark 10-year JGB is indicated at 0.225%, off from Friday’s 0.235% close. The low was 0.215%. The front futures trades 148.48, up 8 ticks after a 148.32-63 range. The front December Euroyen futures contract is indicated at 99.865, down a notch from Friday’s 99.870 close.
Posted on: Mon, 26 Jan 2015 06:12:31 +0000
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