Bets against the EUR reach record levels
Market Comments:
On a day with an almost blank data sheet, currency markets were generally range-bound overnight with mild short-squeeze on the majors detected as traders scaled back dollar longs. EURUSD peeped back above 1.37 but the weight of concerns about Greece’s debt situation remained, and the pair drifted back lower into the close to finish back where it started.
Asian eyes focused on a lead article in the FT this morning which highlighted that, according to the latest reports from CME, speculative positions against the EUR have reached record levels as concerns of a euro-zone debt crisis intensify. Certainly the EUR appears to find fewer obstacles on the way down of late but, with positions too far loaded in one direction, traders are always keen to test the pain threshold of position holders and the risk of a stronger correction may be increasing. On this topic, Nobel Prize winner Stiglitz, currently an advisor to the Greek government, has called for Europe to “teach speculators a lesson” as he likened the situation to the Asian Financial crisis on 1997/98.
Certainly the EUR was given an early boost as newswire headlines reported that ECB Chief Trichet would be leaving a central bank conference in Australia early to attend and ECB meeting. The headline was subsequently corrected to be the scheduled EU meeting on Thursday at which the Greek situation will feature heavily on the agenda. Markets were also abuzz with chatter that Europe was about to orchestrate some kind of Greek rescue package as early as this evening. All-in-all, the EUR found some support in the Asian session though lacked momentum to reach yesterday’s highs. Looks like we are finely poised – maybe a time to tread carefully.
The UK reported some data early in the Asian session and both sets of data carried the caveat of weather-influenced numbers. The BRC retail sales monitor showed retail sales in January falling to its worst level in 15 years, partly as a result of extreme weather but also from a strong buying in December to beat the restoration of 17.5% VAT rates. January like-for-like sales were down 0.7% y/y in contrast to the 4.2% gains in December. The RICS house price balance on the other hand was able to gain 2 points in January to 32, despite a slowdown in enquiries due to the weather. This was above the market consensus of 28 and surveyors were more optimistic on the property market with a greater number expecting sales to rise over the next 3 months than in December. GBP was helped along with the EUR’s rally to take a peek above 1.56.
It’s another quiet day on the data front today with European releases confined to German and UK trade data along with German CPI as well so market direction may be more influenced by chatter, flows and positioning sentiment. The US session is also just as barren with US wholesale inventories and small business/economic optimism the only releases on tap.
Be (more) careful out there!
Economic Data Highlights
- EU Feb. Sentix Investor Confidence out at -8.2 vs. -2.7 expected and -3.7 prior
- CA Jan. Housing Starts out at 186.3k vs. 180k expected and revised 176.1k prior
- UK Jan. RICS House Price Balance out at 32% vs. 27% expected and 30% prior
- UK Jan. BRC Retail Sales out at -0.7% y/y vs. +4.2% prior
- JP Jan. Machine Tool Orders out at +192% y/y vs. +63.4% prior
Upcoming Economic Calendar Highlights
(All times GMT)
- GE Trade Balance (0700)
- GE CPI (0700)
- UK Trade Balance (0930)
- US NFIB Small Business Optimism (1230)
- US Wholesale Inventories (1500)
- US IBD/TIPP Economic Optimism (1500)