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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 26 November 2012 at 4:01 GMT

Asia Today: Currencies steady with event risks looming this week

Market Analyst
Singapore

Positive sentiment from Friday stumbled slightly in a slow, range-bound start to the week in Asia.

Both equities and currencies started off well, holding close to NY closing levels with JPY selling across most pairs evident. However, despite no news to act as a catalyst, we saw a slow drift lower in risk currencies and bourses by mid-morning. There are a number of event risks looming this week so maybe a bit of caution is understandable – we still await the final outcome of the Catalonia weekend elections, the Eurogroup meeting on Greece’s debt package reconvenes today while US fiscal cliff negotiations continue after the Thanksgiving holiday.

Early results show that four different separatist parties control two-thirds of the 135 seat local parliament but the main separatist group, the CiU party saw its seats cut back to 50 from 62.

There were no data releases during the session and the only newsworthy item was BOJ’s Shirakawa speaking in Nagoya. He stuck to the standard script where the central bank will continue easing until its inflation goal is in sight while expecting the economy to remain weak for the time being before resuming a moderate recovery and confirming that the strained relations between Japan and China will have a clear effect on exports in the last quarter of 2012. With regard to the JPY, Shirakawa opined that monetary policy was one way to influence the FX market. He called on the government to pursue fiscal reform and bold deregulation.

Early evidence suggests that Thanksgiving Day openings and midnight shopping has eaten into US Black Friday sales. ShopperTrak, monitoring foot traffic in retail stores, suggests sales were down 1.8 percent on-year to USD11.2 bln. In contrast, online sales monitored by comScore were reported to have leapt 26 percent to above USD1 bln for the first time.

A broader risk-on feel settled on markets on Friday resulting in a weaker USD and EURUSD squeezing higher to just short of the psychological 1.30 level. Data, for once, confirmed this up-move with final German Q3 GDP unchanged at +0.4 percent y/y and IFO surveys both beating forecasts and improving from the previous month. There was also a rumour that Greek lenders had agreed on measures to reduce Greece’s debt to 130 percent of GDP by 2020 (Eurogroup meeting reconvenes today). Failure to agree new EU-wide 7-year budgets was largely ignored.

There were no US data releases to impact markets but the CAD was buoyed by a slightly firmer CPI print, +0.2 percent m/m versus 0.1 percent expected and +1.2 percent y/y versus 1.1 percent expected. Wall Street closed firmer in a shortened session after Thanksgiving, with the day’s volume being the lightest of the year.

Data Highlights

  • GE Q3 Final GDP (nsa) out at +0.4% y/y, as expected and unchanged from prior
  • GE Nov. IFO Business Climate out at 101.4 vs. 99.5 expected and 100.0 prior
  • GE Nov. IFO Current Assessment out at 108.1 vs. 106.3 expected and revised 107.2 prior
  • GE Nov. IFO Expectations out at 95.2 vs. 93.0 expected and 93.2 prior
  • CA CPI out at +0.2% m/m, +1.2% y/y vs. 0.1%/1.1% expected and 0.2%/1.2% prior resp.

Upcoming Economic Calendar Highlights

(All Times GMT)

  • SI Industrial Production (0500)
  • GE GfK Consumer Confidence (1200)
  • US Chicago Fed Activity Index (1330)
  • US Dallas Fed Manufacturing Activity (1530)

For more information on today’s events, please visit the financial calendar

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