Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 22 May 2013 at 6:54 GMT

GBP weakening again. JPY awaits Kuroda press conference

Head of FX Strategy / Saxo Bank

The market is bidding up Euro’s across the board as GBP, CHF and JPY were all weak yesterday. Kuroda’s press conference needs to feed the hungry JPY bears or we risk consolidation soon.

Bank of Japan
The Bank of Japan left the monetary base target unaltered again for the second time since the early April blast off of Kuroda’s Big Move. There was no mention of the moves in bond markets (of course, this being the only thing the market is looking for in reading how determined Kuroda and the government are to stay the course.

Kuroda’s Presss Conference will be the thing to watch for further developments – it was meant to start by the time I am writing this, but has apparently been delayed a bit – so stay tuned for developments there.

In other data overnight, it was interesting to note the split in the Trade Balance data, with imports rising far faster than exports – this is the wrong way around if Abenomics is meant to work. Yes, it is still very early days, but every scrap of data is worth picking over as the success of Japan’s experimentation with new extremes in monetary policy is the biggest theme going among the major currencies.

Aussie down under in the dumps
Australian confidence dove to fresh eight month low only a couple of months after posting a two-year high as the momentum Down Under is really flagging and is likely to continue to do so as the years of an overvalued currency, post-credit bubble environment, and a retooling China (away from basic commodities investment) is going to give the country an economic hangover for years. So far, AUDUSD has only managed a rather meek consolidation and the lack of bounciness is telling.

EURCHF do or die
EURCHF busted back through 1.2500 in a show of broad Euro strength and perhaps in sympathy with the still weak Japanese yen. The pair could continue higher, but the path for the CHF will likely be similar to that for the JPY, i.e., if the JPY perks up, I would be surprised to see EURCHF continuing to rally and vice versa. Note that the SNB ‘s Jordan will be out speaking today. Technically, the pair looks like it wants to rally further and we’re within striking distance of two-year highs (around 1.2570).

A lot of free space above the 1.2570 area if we get there for this pair. The focus could quickly shift to the next round figure at 1.3000. We’ll likely need to see cooperative JPY crosses (also moving higher) for such a development, however, and the momentum will need to keep up or we are faced with the boring reversal/rangebound scenario.



Looking ahead
The Bank of England is up shortly with the latest minutes – hard to imagine anything spectacular as we are in a kind of “lame duck” period for the BoE, which won’t want to make any major splash now that economic data has picked up slightly and with a new remit and new leader on the way in the next couple of months. The weak inflation data yesterday was seen as a green light for Carney to indulge in more monetary experimentation and EURGBP rallied through key resistance around 0.8500. This could be the start of something for the pair towards 0.8600 or even higher. UK Apr. Retail Sales are also on tap.

Later we have the Bernanke testimony to entertain us – will be interesting to watch the Republicans challenging Mr. Bernanke’s policy again as the anti-Fed stance is becoming a cornerstone of Republican political positioning – even if that makes little sense for their constituency and is full of hypocrisy in many cases. Mr. Bernanke is likely to offer cautious optimism and the market will focus on the way he hints at the potential for a “tapering” of asset purchases. There is certainly room for surprise either way as the market seems uncertain on what to do right here with the greenback.
Tonight we have the latest China HSBC flash manufacturing PMI, which had dipped back close to the 50 level in April and is expected unchanged. The Chinese regime is faced with the tall task of choking off the regenerating housing bubble/hydra and a refocusing of its growth efforts away from brute infrastructure investment and building and toward consumption and higher environmental standards.

Stay careful out there.

Economic Data Highlights

  • Japan Apr. Adjusted Merchandise Trade Balance out at -¥764.4B vs. -¥602.9B expected and -¥919.8B in Mar.
  • Japan Apr. Merchandise Trade Exports out at +3.8% YoY vs. +5.4% expected and vs. +1.1% in Mar.
  • Japan Apr. Merchandise Trade Imports out at +9.4% YoY vs. +6.7% expected and vs. +5.5% in Mar.
  • Australia May Westpac Consumer Confidence out at 97.6 vs. 104.9 in Apr.
  • Japan BoJ left 2014 Monetary Base Target unchanged at ¥270T as expected

Upcoming Economic Calendar Highlights (all times GMT)

  • Euro Zone Mar. Current Account (0800)
  • UK Bank of England Meeting Minutes (0830)
  • UK Apr. Retail Sales (0830)
  • UK May CBI Trends (1000)
  • Switzerland SNB’s Jordan to Speak to Journalists (1000)
  • Canada Mar. Retail Sales (1230)
  • US Fed’s Bernanke to Testify on Economic Outlook before Congress (1400)
  • US Apr. Existing Home Sales (!400)
  • US DoE Weekly Crude Oil and Product Inventories (1430)
  • US Fed’s Fisher to Speak (1700)
  • US Fed releases FOMC Minutes (1800)
  • Sweden RIksbank’s Jansson to Speak (2200)
  • China May HSBC Flash Manufacturing PMI (0145)
  • Japan Bank of Japan’s Monthly Economic Report for May (0500)



The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. 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 ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail