John J Hardy
Eurozone and German PMIs both better than expected, data from France a little disappointing but overall it's good news for the Euro.
Article / 08 November 2012 at 15:57 GMT

ECB sparks widespread yawn as EURUSD slips a bit lower

John J Hardy John J Hardy
Head of FX Strategy / Saxo Bank

Mr. Draghi had little to say that was worth reacting to as EURUSD dropped but didn’t lurch into a full scale meltdown. Next focus, please…

Mr. Draghi’s press conference was a snoozer with no real revelations other than the usual pointless forecasts (slightly higher inflation now, less inflation risk next year, growth risks still high, etc.) and the fascinating statement that the ECB hasn’t discussed what to do next year. Hmm… Besides that, Mr. Draghi generally administered a back-slap on the effectiveness of the OMT and reiterated that that conditionality is a must, i.e., that the OMT will only be put in position in the event that Spain officially asks for a bailout. The market generally shrugged its shoulders and sold Euro a bit more as peripheral spreads headed wider – with the Spanish 10-year leading the way with a 12-bp rise as of this writing while German yields were flat on the day. But then EURUSD found a bit of support as risk appetite tried to make a bit of a comeback. The recent past before the US election showed a very fickly churning in risk appetite - one would like to think that we get bigger swings now that this huge event risk is out of the way, though in a way, the fiscal cliff is actually far more significant a risk.

The Bank of England meeting today was the standard non-event. The market tried to buy a bit more GBP against the flailing Euro, but there was hardly anything priced in. In GBPUSD, the 1.5950/1.6000 area on the close remains the pivot zone of interest for now, with downside pressure on risk aversion towards the key 200-day moving average test.

The US jobless data looked good this week, but for the wrong reasons, as a huge section of the population in the Northeast was busy hunkering down for the storm. Look for a few weeks of claims possibly spiking higher – like for Hurricane Katrina if with far less amplitude, before the numbers settle again.

One interesting development was today’s smaller than expected trade deficit for September out of the US, far smaller than expected and the smallest in several months. One thing is for sure about the fiscal cliff – an immediate reduction due to tax cut expiry will certainly feed straight into this number.

Looking ahead
Now what do we focus on? We’ve talked up the fiscal cliff, so let’s look for signs that a) there is a consensus to put the issue off until after the next Congress convenes next year, perhaps the most likely scenario, or whether we will see the spectacle of “playing chicken” with the cliff from both sides. A sweeping deal that fully reduces the cliff is not considered one of the likely outcomes. Stay tuned for the first “developments” next week. Until then, we have the wiles of the ups and downs in risk appetite and the fact that yesterday saw quite a reversal and sets the tone for further USD gains until/unless it is reversed.

Key EURUSD resistance now comes in at 1.2825 with this latest move lower (200-day moving average) and the AUDUSD situation looks as indeterminate as ever – a little bearish reversal, but very modest compared to overall risk meltdown from yesterday. The strong employment data out overnight from Australia saw Aussie continuing to be able to resist selling on the broader developments in risk appetite. And AUDNZD jumped higher on the very contrasting and ugly New Zealand employment data. In addition, the 9-lives Aussie is probably being reinvigorated by hopes of a new Chinese infrastructure spending bonanza.

To close out the week on the economic calendar, we have tonight’s Industrial Production and Retail Sales numbers and inflation data from China (read this interesting ftalphaville post that suggests China may double down to a degree on the path of more stimulus, for better or more likely for the longer term worse.

Norway’s CPI is up tomorrow and I’m wondering if NOK is getting a bit too pricey in a risk-off environment. USDNOK might be interesting trade if so. Elsewhere, we’ve got the UK’s wildly swinging trade number tomorrow together with the preliminary US November University of Michigan Confidence reading after last month’s jump proved far more exaggerated than in other surveys.

Economic Data Highlights

  • New Zealand Q3 Unemployment Rate out at 7.3% vs. 6.7% expected and 6.8% in Q2
  • Japan Sep. Machine Orders out at -4.3% MoM and -7.8% YoY vs. -2.1%/-4.9% expected, respectively and vs. -6.1% YoY in Aug.
  • Japan Sep. Adjusted Current Account Total out at -¥142B vs. +¥206B expected and +¥722.3B in Aug.
  • Australia Oct. Employment Change out at +10.7k vs. +0.5k expected and +15.5k in Sep.
  • Australia Oct. Unemployment Rate out at 5.4% vs. 5.5% expected and 5.4% in Sep.
  • Switzerland Oct. Unemployment Rate out at 3.0% as expected and vs. 2.9% in Sep.
  • Germany Sep. Trade Balance out at +16.9B vs. +15.5B expected and +16.3B in Aug.
  • Sweden Sep. Average House Prices out at 1.92M vs. 2.11M in Aug.
  • UK Bank of England leaves Asset Purchase Target and Interest Rate unchanged as expected
  • Euro Zone ECB leaves interest rate unchanged at 0.75% as expected/
  • Canada Oct. Housing Starts out at 203.1k vs. 210k expected and 225.2k in Sep.
  • Canada Sep. International Merchandise Trade out at -0.83B vs. -1.5B expected and -1.52B in Aug.
  • US Weekly Initial Jobless Claims out at 355k vs. 365k expected and 363k the previous week
  • US Weekly Continuing Claims out at 3127k vs. 3257k expected and 3262k last week
  • US Sep. Trade Balance out at -$41.5B vs. -$45.0B expected and -$43.8B in Aug.
  • Us Weekly Bloomberg Consumer Comfort Index out at -34.4 vs. -34.7 last week

Upcoming Economic Calendar Highlights (all times GMT)

  • New Zealand Oct. REINZ Housing Price Index (2000)
  • New Zealand Oct. Credit Card Spending (2145)
  • Australia RBA Monetary Policy Statement (0030)
  • China Oct. Consumer and Producer Price Index (0130)
  • Japan Oct. Consumer Confidence (0500)
  • China Oct. Industrial Production (0530)
  • China Oct. Retail Sales (0530)




The Saxo Bank Group provides an execution-only service and all information provided on is solely for general information. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. Saxo Bank Group will not be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available as part of the or as a result of the use of the Any information which could be construed as investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such should be considered as a marketing communication. Furthermore it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Please read our disclaimers:
- Notification on Non-Independent Investment Research
- Full disclaimer

Show latest activity
Sorry, there was a problem communicating with the servers. We are working hard to solve this. Please try again later.
Oops! There was a problem communicating with the OpenAPI Portfolio service.
Oops! There was a problem communicating with the OpenAPI History service.
Oops! There was a problem communicating with the OpenAPI Reference service.
Oops! There was a problem communicating with the OpenAPI Root service.
Oops! There was a problem communicating with the OpenAPI Trading service.
Sorry, there was a problem communicating with the Financial Calender servers. We are working hard to solve this. Please try again later.
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail