Morning Briefing

Morning Briefing for Wednesday, 22 May 2013 (Updated 09:19:06 CET)Eyeing the US dollar ahead of key events today

What’s new:

Asia: Equity indices mixed this morning
Japan: BoJ left rates unchanged in line with expectations
Forex: Aussie and Kiwi continue to tumble

Overnight Rates and Indices:

                        Low    High    Change
EUR/USD    1.2903    1.2939    0.16 %
USD/CHF    0.9681    0.9715    0.07 %
GBP/USD    1.5138    1.5174    -0.04 %
USD/JPY    102.35    102.74    -0.11 %
EUR/CHF    1.2515    1.25426    -0.07 %
EUR/JPY    132.22    132.69    -0.28 %
Dow Jones    15325.68    15434.50    0.34 %
Nasdaq    3011.51    3036.71    0.18 %
S&P 500    1662.67    1674.93    0.17 %
Nikkei 225    15432.64    15706.63    1.60 %
Shanghai    2292.43    2314.18    -0.18 %
Gold spot    1372.47    1389.16    0.78 %
Crude Oil    95.51    95.97    -0.27 %

 

Comments:

All eyes on the US Dollar today; with Fed Chairman Bernanke expected to testify to congress later today and with the minutes of the last FOMC meeting expected to be released later this evening as well. The heightened attention comes because in recent days some Fed officials have been stepping up talk that the Fed may be closing the tap on QE in a matter of months but two fed speakers yesterday somewhat dampened this speculation.

According to the Bloomberg Correlation-Weighted Currency index, an index that gives an indication of the currency’s strength or weakness when seen against a representative basket of currencies, the US dollar has been the largest gainer amongst the major counterparts these past 3 months. Over the past 6 months the USD has seen gains of 3.54%.

The Asian session was largely uninspiring for the EUR/USD with the currency pair sticking to a range of 1.2904-1.2938, ahead of the European session. Despite flat against the US Dollar we saw the euro recover some ground against the rest of the majors despite the performance remained rather marginal.  The currency pair looks set to attempt higher levels for the day even though the pair’s bearishness should persist. The currency pair should find significant resistance just ahead of 1.30 and will likely slip lower unless it fails to push higher.

Overnight we have had data for Japanese Merchandise Trade balance with April’s numbers actually disappointing expected and previous figures. For the same period Exports did register an improvement but were still weaker than the expected; imports rose as well and by a far greater margin. The BoJ left policy rates unchanged in its scheduled policy communication earlier today.

The yen looks overall flat when seen against the major currencies, with gains against the antipodeans (AUD, NZD) offsetting losses seen against the rest of the majors.

In the Forex markets the Aussie and the kiwi attracted the largest losses. Australian consumer confidence, reported earlier this morning, was rather negative coming out at -7% versus a previous -5.1%, the index slipped to 97.6 from a previous 104.9.

Lower commodity prices are leaving their toll on Australia’s commodity based economy; with investment spending for the mining sector cooling down and inflation remaining low it is highly likely that recent rate cuts from the RBA are followed by other cuts.

Yesterday the EUR/CHF rose to session highs at 1.2529 as in its annual report the IMF advised the SNB, that should safe haven inflows return, it should consider imposing negative interest rates on bank excess reserves. As long as 1.25 levels hold the currency pair is expected to continue rallying towards 1.2596; Sup at 1.2471/1.2422, Res at 1.2550/1.2579.


Good day