Analysis and Recommendations: The EUR/USD soared as a favored currency in the risk off environment as Janet Yellen continues her testimony before US
The EUR/USD soared as a favored currency in the risk off environment as Janet Yellen continues her testimony before US elected officials. The euro soared to 1.1322 up 30 more points today. he euro has now completely recovered from the blip that peaked as Yellen delivered her testimony to Congress.
It’s finished a roundtrip to 1.1161 and then back to 1.1290 in another day of volatile but non-directional trading. It’s all about risk sentiment at the moment. Hikes matter less at the moment; the market wants to see which central banks get it. Instead, Yellen seemed distant and reluctant to back off her hawkish rhetoric. At the same time, a strong US 10-year auction showed that bonds are still in demand.
Jens Weidmann from the ECB said that there is no doubt that the current monetary policy situation is not an easy one, with downside risks to inflation in the euro area having increased recently. This concern is also evident in the introductory statement of the ECB Governing Council last week. There is no doubt that uncertainty is currently running high. Given the recent financial market turbulence in China, the continued drop in oil and commodity prices and the heightened geopolitical risks, doubts are being raised in some quarters as to whether the international environment is still providing the stimuli for euro-area growth that were incorporated into the December Euro system staff projection, with economic growth for 2016 and 2017 expected to be 1.7% and 1.9%, respectively.
However, we shouldn’t paint the economic outlook blacker than it actually is. The financial market turbulence in China at the start of January and its partial transfer to the rest of the world demonstrate the nervousness of the financial markets. However, the price falls in China can primarily be viewed as further corrections to earlier, sharp price rises. And they were undoubtedly also reinforced by an ill-timed regulatory measure. In my opinion, there are currently no signs of a severe economic slump in China. Instead, there are indications of a gradual slowdown in economic growth. This is consistent with China’s transition to a more service-oriented, domestic-driven economic model.
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Today’s economic releases:
Cur. | Event | Actual | Forecast | Previous | |||
Japan – National Founding Day | |||||||
China – Lunar New Year | |||||||
NZD | Business NZ PMI (Jan) | 57.9 | 56.7 | ||||
GBP | RICS House Price Balance (Jan) | 49% | 52% | 49% | |||
EUR | Eurogroup Meetings | ||||||
USD | Initial Jobless Claims | 281K | 285K | ||||
CAD | New Housing Price Index (MoM) (Dec) | 0.2% | 0.2% | ||||
USD | Fed Chair Yellen Testifies |
Upcoming Economic Events that you should be monitoring:
Friday, February 12, 2016
Holiday China – Lunar New Year
Cur. | Event | Actual | Forecast | Previous | |||
AUD | RBA Governor Stevens Speaks | ||||||
AUD | Home Loans (MoM) (Dec) | 3.0% | 1.8% | ||||
EUR | German CPI (MoM) (Jan) | -0.8% | -0.8% | ||||
EUR | German GDP (QoQ) (Q4) | 0.3% | 0.3% | ||||
EUR | German GDP (YoY) (Q4) | 2.3% | 1.8% | ||||
EUR | EU Finance Ministers Meeting | ||||||
EUR | GDP (YoY) (Q4) | 1.5% | 1.6% | ||||
EUR | GDP (QoQ) (Q4) | 0.3% | 0.3% | ||||
EUR | Industrial Production (MoM) (Dec) | 0.3% | -0.7% | ||||
USD | Core Retail Sales (MoM) (Jan) | 0.1% | -0.1% | ||||
USD | Export Price Index (MoM) (Jan) | -0.9% | -1.1% | ||||
USD | Import Price Index (MoM) (Jan) | -1.4% | -1.2% | ||||
USD | Retail Sales (MoM) (Jan) | 0.1% | -0.1% | ||||
USD | FOMC Member Kaplan Speaks | ||||||
USD | Business Inventories (MoM) (Dec) | 0.1% | -0.2% | ||||
USD | FOMC Member Dudley Speaks | ||||||
USD | Michigan Consumer Expectations | 82.0 | 82.7 |
Government Bond Auctions
Date Time and Country
Feb 11 N/A Italy Euro 4-5bn 30-yr syndicated bond auction
Feb 11 11:03 Sweden Holds I/L bond auction
Feb 11 11:10 Italy Announces details of bond auction
Feb 11 11:30 UK 3.5% 2045 Gilt auction
Feb 11 19:00 US Holds 30-year bond auction
Feb 11 n/a US Details of 30-yr TIPS auction on Feb 18
Feb 12 11:10 France Details of bond auction on 18 Feb