FOPLADE- Análisis Financiero
USD WELL SUPPORTED BUT REAL STORY IS GBP COLLAPSE
• GBPUSD has collapsed through 1.50 and traded to a 10-month low.
• Canadian Q4 GDP and US February PMI important for USD direction today.
• Rumours over an EU plan to help Greece circle; still EUR follows GBP lower.
• AUD - OIS market pricing in a 60% chance that the RBA hikes today (10:30pm EST).
FX Market Update
The USD is stronger to begin the week as equities put in a robust performance in Asia,
while Europe is up but under pressure along with US equity futures. The Chinese
manufacturing PMI slipped somewhat, missing market expectations, though still
remaining in expansionary territory. The FX leaders today are the USD, AUD and CAD,
while GBP is a stunning underperformer with SEK and NOK also under pressure. •
While the macro financial environment seems to be beginning the weak fairly robustly
as China’s PMI miss is not having a negative impact on equity markets, it is a rather
action packed week on the data front that should provide directional force. Many eyes
will be focused on US ISM manufacturing today, and the non-farm data on
Friday (with ADP and jobless claims coming before). Consensus currently expects –50K
on nonfarm while Scotia Economics has a more optimistic view for a –10K print. Following
last week’s reiteration of a generally dovish viewpoint from Fed Chief Bernanke to
take some of the wind out of USD bulls, the market would be inclined to trade the USD
higher on a sharp non-farm upside surprise. This is particularly so since further out Fed
Funds futures contracts have priced in consistently weaker rate expectations, with the
December contract now pricing in less than 0.5%, down from near 1.1% at
the beginning of January (last week was particularly harsh on future Fed rate expectations).
• However, the USD has shown little propensity to be influenced by the rate
outlook as the rolling 1-month correlation between the 2-year Treasury and the USD
index has remained insignificant for the past two to three weeks. Indeed the USD has a
mind of its own as the USD trade weighted index remained relatively flat over the
month of February, ignorant not only to the rates market, but also to developments in
equities as the USD correlation with global equities has also remained rather insignificant
in recent weeks. Stronger than expected showings on the PMIs and employment
data could provide the USD with another leg higher. • South Korea, which holds the G-
20 presidency this year, has suggested a formal global currency swap arrangement
in order to foster financial stability and remove the incentive for countries
(particularly emerging markets) to accumulate precautionary reserves. The argument is
that this would also help to address global imbalances as countries would not need to
sell their currencies to buy USD assets (thus weakening their currencies), however this
ignores a strong incentive that countries have to maintain weak currencies; an export
boost. S.T.
Americas
USDCAD (1.0540) • CAD is outperforming, though off 0.3% against the USD. The daily
price action is still fairly neutral for USDCAD, without any real trend in play, however
the past two sessions have seen lower intraday highs and lows. It is an important week
for Canada on the data front as today we get a look at Q4 GDP with the market
expecting a very sharp recovery to 4.2% q/q annualized, a view Scotia Economics is in
line with as they call for 4.3%. The Bank of Canada follows tomorrow with markets
expecting a hold at 0.25%, but the most relevant information for traders will be
held in the statement details. Ivey PMI, international trade and housing data also figure
highly but Friday’s employment data will be key. Solid reads on all counts could provide
USDCAD with the impetus it needs to begin another run at parity though the pair will
have to contend with 1.5 month trend support (holding at 1.04 today). S.T.
Europe
EURUSD (1.3530) • Markets were quiet until very early in the North American session, when EUR followed GBP lower and collapsed by almost 100 points. Data from the Eurozone was generally strong, with the unemployment rate dropping to 9.9% and PMI coming in at 54.2. There are several indications that the EU is in the midst of piecing together a plan to help Greece - see Suggested Reading, however there has yet to be any formal confirmation of this. This week it is expected that Greece will launch a €5bn bond sale, the results of which will prove a key test for Greece and EUR. Friday’s CFTC data, highlighted that EUR speculators continue to add to their net short positions as it has grown to 71.6k contracts or $12.1bn.
It hints that EUR traders are unfazed by the extreme positioning and willing to move increasingly short the currency even as the threat of a period of short covering looms. • Over the last seven sessions, EUR has ranged between 1.3444 and 1.3692. We would expect to see the currency hold in this range, however a close below 1.3450 would be bearish. C.S.
GBPUSD (1.4875) • Downward pressure on sterling continues to build, giving the impression that the next crisis could be brewing in the UK. Today the currency has collapsed a further 2.4% against the USD. On a year-to-date basis it is now the worst performing primary currency, having lost 8.0% against the USD and 2.6% against EUR. Friday’s weekly CFTC data, showed an ongoing appetite to build short GBP positions, as there was a 6.7k contract build in the gross short position, which brought the net short GBP holding to $6.1bn. Accordingly, sentiment is
growing increasingly bearish GBP (something we agree with in the short-term) and there appears to be more downside ahead for the currency. Technically, the RSI is at 21, which implies it is approaching oversold levels, however currencies can remain oversold for extended periods. The MACD, candlestick pattern, moving averages and DMI all point to ongoing weakness in the currency. Fundamentally, the combination of a large fiscal deficit, weakness in the financial
sector, the increasing probability that there will be a hung parliament in the spring election and today’s GBP negative M&A announcement (Prudential Plc has made a $35.5bn cash and stock bid for an Asian life insurance company, currently owned by AIG) are all working against GBP. Support comes in at congestion of 1.4775, followed by 1.4500. C.S.
Asia / Oceania
AUDUSD (0.8965) • On the back of broader USD strength, AUD has lost 0.3% against the USD. Today at 10:30pm EST, the RBA will announce its interest rate decision. Of the 19 economist surveyed by Bloomberg, only five expect rates to remain on hold at 3.75%; with the remaining 14, expecting a 25bpts increase to 4.00%. However, the OIS market is only pricing in a 60% chance of a rate hike. Data from Australia has been firm, with employment, housing and retail sales all performing well; however ongoing fears over the strength of the global recovery might provide the RBA with a reason to pause today. This would put downward pressure on AUD. Technically, initial support lies at the 21-day moving average of 0.8877, followed by last week’s low of 0.8801. C.S.
USDCNY (6.8263) • China’s PMI manufacturing came in at 52, which disappointed markets, as it was below expectations and January’s reading (consensus had been for 55.2). A slowing in China will put downwardpressure on risk assets (CAD, AUD and equities) as it will increase concerns over global growth. C.S.
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