Yet another day goes by without a resolution to the Greek bond swap talks; meaning we are still sat with a major hurdle preventing risk appetite from accumulating or EURUSD from making further upside progress. Yesterday, the EU's Rehn said he expects an agreement between Greece and its private sector creditors by end of this week; a comment which is only likely to increase the potential for disappointment if that timeline is not met. He added that Greece must make decisive steps to bring its debt down to sustainable levels, noting that Portugal is making “good progress” on fiscal reforms.
During the Asian session we have heard fresh warnings from Japanese Finance Minister Azumi that the latest yen moves are “one-sided” and increasingly driven by speculation. This is a strong signal that further appreciation of the yen (which could perhaps be prompted by weak data today) might inadvertently trigger another round of aggressive USDJPY buying by the BoJ/MoF. The last time Japanese authorities intervened in the currency was just as the pair hit lows of 75.55, a level we are just over 60 pips away from.
Coming up today, we have a busy schedule of European services PMI figures, along with the Eurozone’s December retail sales (consensus: +0.3% MoM, -1.3% YoY, prior: -0.8% MoM, -2.5% YoY). The main event of today’s session however, will be the release of January non-farm payrolls and US unemployment rate. Markets are looking for the headline payrolls to come out at 140k after last month’s 200k print, and for the unemployment rate to remain steady at 8.5%. Earlier in the week, the ADP employment report was slightly lower than expected (170k vs. 182k expected), but still a solid positive number in absolute terms.
Until the non-farm payrolls release, we expect FX markets to trade in a sideways fashion; with most participants lacking the conviction to engage in major positions ahead of such a potentially volatile event. Of course, any announcements out of Athens will garner significant attention; but until those talks reach a satisfactory conclusion, expect EURUSD to remain capped.
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During the Asian session we have heard fresh warnings from Japanese Finance Minister Azumi that the latest yen moves are “one-sided” and increasingly driven by speculation. This is a strong signal that further appreciation of the yen (which could perhaps be prompted by weak data today) might inadvertently trigger another round of aggressive USDJPY buying by the BoJ/MoF. The last time Japanese authorities intervened in the currency was just as the pair hit lows of 75.55, a level we are just over 60 pips away from.
Coming up today, we have a busy schedule of European services PMI figures, along with the Eurozone’s December retail sales (consensus: +0.3% MoM, -1.3% YoY, prior: -0.8% MoM, -2.5% YoY). The main event of today’s session however, will be the release of January non-farm payrolls and US unemployment rate. Markets are looking for the headline payrolls to come out at 140k after last month’s 200k print, and for the unemployment rate to remain steady at 8.5%. Earlier in the week, the ADP employment report was slightly lower than expected (170k vs. 182k expected), but still a solid positive number in absolute terms.
Until the non-farm payrolls release, we expect FX markets to trade in a sideways fashion; with most participants lacking the conviction to engage in major positions ahead of such a potentially volatile event. Of course, any announcements out of Athens will garner significant attention; but until those talks reach a satisfactory conclusion, expect EURUSD to remain capped.
By
M.Zohaib Gadit
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