29 March 2010 at 7:18 GMT
EUR squeezes shorts in early Asian trading; Greek bond issuance likely this week…
Market Comments:
The USD was generally softer across the board in Friday’s session as the draft EU agreement on the Greek bailout, follow-up supportive comments from EU officials, S&P’s affirmation of Portugal’s debt rating (in contrast to Fitch’s downgrade) and a firmer US Michigan confidence reading all conspired to promote better risk appetite. US yields were also a tad softer from the mid-week spike amid weekend profit-taking and as a result EURUSD pushed higher to take out small stops above 1.34. In other data releases, US Q4 GDP was marked marginally lower at the revision (– 5.6% q/q vs. 5.9% previously) and this also cemented the dollar’s weakness.
The start of trading in this holiday-shortened week was extremely volatile, with EURUSD shooting 100 points higher from NY closing levels near 1.3415 in minutes and taking out stops above the 1.35 level. The search for reasons to fit the move has come up with a number of possibilities: The market was again overly positioned short EUR as latest data from the IMM showed EUR shorts had again reached record levels; The market was prompted into risk aversion mode after the Bank of Israel hiked rates by 25bp at the weekend (perhaps less credible as other “risk currencies” failed to follow – AUD notably stuck in a 30 point range); perceived corporate demand following weekend reports that China carmaker Geely had finalized a $1.8 bln bid for Volvo; and general better feeling about Greece as it is expected to come to the debt markets with the first bond issuance since the EU agreement last week. (Note the FT reports they are interested in borrowing about €5 bln before the end of the month). Whatever the reason, the move was fierce and, once the stops were taken out, we drifted back down to opening levels.
UK opinion polls continue to show neither major political party gaining a majority at the pending election (on this note, chatter is that an announcement is not likely before the Easter break with most pundits favouring early May), with each of the two polls released showing differing parties ahead. However, GBP held onto Friday’s gains and looks to be stabilizing around the 1.50 mark.
It is a relatively slow start to the week data-wise but things pick up as we head towards the turn of the month (and not forgetting the end of the Japanese financial year) For today, Europe sees German states release March CPI numbers along with Sweden’s retail sales. UK data focuses on lending data with consumer credit, mortgage approvals and money supply all slated while the EU also releases confidence indicators. US data is limited to personal income/spending and Dallas Fed manufacturing activity.
Looking ahead we have an interesting week as we switch over to April. For Japan, apart from financial year-end, we have the Tankan survey on Thursday. Risk bulls might take a close look at Australia’s retail sales on Wednesday with US consumer confidence an early risk factor tomorrow. Undoubtedly the highlight of the week will be the non-farm payroll and unemployment report on Friday which is also the Good Friday holiday for most centres.
Successful trading!
Economic Data Highlights
- US Final Q4 GDP out at +5.6% q/q vs. +5.9% previously
- US Mar. Final Michigan Confidence out at 73.6 vs. 73.0 expected and 72.5 prior
- JP Feb. Retail Trade out at +4.2% y/y vs. +1.6% expected and revised +2.3% prior
- JP Feb. Retail Trade out at +0.9% m/m S/A vs. -1.2% expected and revised +2.0% prior
- AU Feb. HIA New Home Sales out at -5.2% m/m vs. 9.5% prior
Upcoming Economic Calendar Highlights
(All times GMT)
- EU German states report Mar CPI (various)
- Sweden Retail Sales (0730)
- UK Net Consumer Credit (0830)
- UK Mortgage Approvals (0830)
- UK M4 Money Supply (0830)
- EU Business Climate Indicator (0900)
- EU Euro-zone Confidence Indicators (0900)
- US Personal Income/Spending (1230)
- US Dallas Fed Manufacturing Activity (1430)
- CA BOC’s Jenkins to speak (1555)