FX Update: GBPUSD Nearing Cycle Lows
Saxo Bank | Apr 10, 2015 05:16AM ET
The US Treasury released its semi-annual currency report yesterday, and it recommended that Europe do more on the fiscal side and singled out Germany’s need to stimulate internal demand.
(With rates and inflation where they are and with the European Central Bank printing this much money, it’s a cinch to argue for a trillion euros of stimulus by policymakers to boost economic activity, though it might take a recession before any such move becomes more likely.)
The report also contained a mild rebuke of Japan’s “over-reliance” on monetary policy and said the nation needed a more balanced approach together with fiscal and structural reforms to boost internal demand (see the WSJ for more coverage) .
The criticism of Japan is mildly JPY-positive as it may raise the bar for the Bank of Japan to launch a third round of aggressive monetary base expansion and asset purchases on fears of more intense criticism from the US and other quarters.
Today’s economic calendar is populated with a few items of interest for the pound, NOK (Industrial production and CPI) and CAD (employment). Sterling in particular is interesting today as GBPUSD trades within a figure of its lows for the cycle (below 1.4650) as we await the release of the February Manufacturing Production data after a weak January report.
GBPJPY is also on the ropes after getting pushed hard yesterday back below the 200-day moving average.
Chart: AUDUSD
Would like to see a sharp close lower in AUDUSD to set up an eventual push at range lower and resumption of the bear market, as we’ve gone too long without a trending move in this pair.
The G-10 rundown
USD: No data of note until next Tuesday’s Retail Sales data. Still room in most USD pairs for further USD appreciation without breaking to new highs for the cycle – with GBPUSD the closest to key extremes.
EUR: Trading on the weak side until further notice as the focus has shifted to the cycle lows near 1.0500 in EURUSD and EURJPY and other EUR pairs are looking to join the EUR carry trade bonanza.
JPY: USDJPY going nowhere in a hurry and interesting to see whether the rally in pairs like AUDJPY and NZDJPY will run out of steam here as well on the idea that nothing is forthcoming from the BoJ for quite some time, as EURJPY and GBPJPY have picked up downside momentum.
Get The News You Want
GBP: Watching the data today for whether GBPUSD and GBPJPY slip to new lows for the cycle and whether EURGBP support holds. GBP bulls should focus on EURGBP until/unless we see a sharp reversal in the two former. Weak data today from the UK will encourage fresh lows for the cycle in GBPUSD as well.
CHF: EURCHF is pushing on the 1.0400 area range lows – interesting to watch for potential new lows beyond there on general EUR weakness.
AUD: EURAUD has plummeted on the enthusiasm for euro carry trades. AUDUSD, meanwhile, has been stuck in a range for a long time – let’s see something happening soon if we’re to believe in downside continuation. First step would be a sharp move lower below 0.7650 and even 0.7600 today.
CAD: Watching today’s employment report out of Canada – it’s a notoriously jumpy series, but another weak report after the weak February report could possibly see the strongest reaction. USDCAD looking higher as long as we’re north of 1.2500.
NZD: A good follow up move lower through this week’s lows is needed to whet bears’ appetite for a bigger test lower.
SEK: EURSEK still looks a bit heavy on euro weakness and as upside momentum has left the scene.
NOK: Reasonably important data today, with positive surprises potentially opening up for a test of the range lows in EURNOK.
Economic Data Highlights
- China Mar. CPI out at +1.4% YoY vs. +1.3% expected and vs. +1.4% YoY in Feb.
- China Mar. PPI out at -4.6% YoY vs. -4.8% expected and -4.8% in Feb.
Upcoming Economic Calendar Highlights
- Sweden Mar. Average House Prices (0730)
- Norway Feb. Industrial Product Manufacturing (0800)
- Norway Mar. CPI (0800)
- UK Feb. Industrial and Manufacturing Production (0830)
- Canada Mar. Housing Starts (1230)
- Canada Mar. Unemployment Rate and Net Change in Employment (1230)
- US Fed’s Lacker (FOMC voter) to Speak (1245)
- Japan Bank of Japan meeting minutes from March 16-17 meeting (Sun 2350)
- Japan Feb. Machine Orders (2350)
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