09 February 2012 at 5:34 GMT
The Asian session was a little turbulent as one newswire reported China CPI data early and incorrectly, while Greek headlines suggested the latest meeting had ended inconclusively - only to subsequently inform us only one issue remained unresolved.
The EUR started off on a weak note as we heard that the latest meeting between Greek coalition partners had finished without a deal being concluded. That was enough to push EURUSD down 40-50 points before it transpired that progress had been made and only an agreement on pension cuts remained so we retraced higher.
The rebound from the lows in EURUSD was triggered by a headline in the UK Guardian that Greece had agreed bailout terms (though the details in the article contained nothing new from what was known earlier). Nevertheless, the EUR bounced to new highs for the day and settled there for the rest of the session.
Elsewhere, China’s January inflation data was supposedly reported early – above forecast and higher than the previous month - which tempered the risk bulls' enthusiasm somewhat. But it transpired that old data had been announced so we reverted back and waited for the “real” data. This proved to be an even bigger shock with CPI jumping to 4.5% y/y from 4.1% (4.0% consensus), the first increase in 6 months, with the bulk of the increase from higher food prices. These rose 10.5% y/y and non-food 1.8%. PPI data was more benign, however, falling to +0.7% y/y from +1.7%. While the higher consumer activity linked to Lunar New Year celebrations has an impact (though anecdotal evidence suggests spending this year was not as excessive as in previous years) the risk that it crimps room for further easing from the PBOC was felt in a lower AUD.
Tight ranges had prevailed in the EUropean and US sessions as the markets waited for any developments from the ongoing Greek talks. That said, EURUSD managed to touch new 2012 highs before consolidating with FT comments that Germany wants most of the Greek aid payment delayed having limited impact. In addition, the ECB rebuffed yesterday’s comments in the WSJ that it had decided to contribute to Greek debt restructuring. USDJPY popped its head above the 77.0 handle which Japanese exporters greeted with heavy offers.
There was not much to report on the US data front yesterday with MBA mortgage applications rising 7.5% from -2.9% the previous week. Canada’s housing starts were weaker than the previous month but better than forecast though CAD remained range-bound. Wall St closed mildly positive on thin volumes with the DJIA up 0.04%, S&P +0.22% and the Nasdaq +0.41%.
Europe will be in central bank mode, while also looking out for more Greek headlines. You can read Nick’s lowdown on our expectations here.
Data Highlights
- US MBA Mortgage Applications out at +7.5% vs. -2.9% prior
- CA Jan. Housing Starts out at 197.9k vs. 194.0k expected and revised 199.9k prior
- NZ Q4 Unemployment Rate out at 6.3% vs. 6.5% expected and 6.6% prior
- NZ Q4 Employment Change out at +0.1% q/q, +1.6% y/y vs. 0.4%/1.9% expected and 0.2%/1.1% prior resp.
- JP Q4 Housing Loans out at +2.2% y/y vs. +2.1% prior
- JP Jan. M2 Money Stock out at +3.0% y/y vs. 3.1% expected and revised 3.2% prior
- JP Dec. Machine Orders out at -7.1% m/m, +6.3% y/y vs. -5.0%/+8.5% expected and 14.8%/12.5% prior resp.
- AU Q4 NAB Business Confidence out at +1 vs. revised -3 prior
- China Jan. PPI out at +0.7% y/y vs. +0.8% expected and +1.7% prior
- China Jan. CPI out at +4.5% y/y vs. 4.0% expected and 4.1% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- JP Consumer Confidence (0500)
- JP machine Tool Orders (0600)
- Swiss Consumer Confidence (0645)
- Sweden House Prices (0830)
- UK Industrial Production (0930)
- UK Trade Data (0930)
- UK BOE Rate Announcement (1200)
- EU ECB rate Announcement (1245)
- CA New House Price Index (1330)
- US Initial Jobless Claims (1330)
- US Bloomberg Consumer Comfort Index (1445)
- US Wholesale Inventories (1500)
- UK NIESR GDP Estimate (1500)
For more information on today’s events, please visit the financial calendar