News and markets
The USD was weak across the board yesterday after the Moody’s comments, and EUR AUD and JPY all took out stops on the other side of important chart levels. Some commentators blame increased QE3 expectations for the weak USD, but this seems unlikely to me judging by the US bond and rates moves yesterday.
Today the AUD has continued the move, helped by a good Consumer confidence number early in the morning. Spot has gone up from 1.0430 to 1.0489 over the course of the Asian morning, and the NZD has gone with it. USDJPY has bounced very slightly from yesterday’s 3month low to 77.90.
EUR was stable for most of the session, but then at lunchtime saw a blip up to 1.2883 on a rather odd headline: A Finnish newspaper has said that Spain’s PM is considering asking for ECB help for Spanish bonds but is not considering asking for a full bailout. (This is an odd thing for Rajoy to say because Draghi has already made it clear that countries will only get ECB help if they apply for and receive a proper EFSF/ESM funding deal).
S Korean unemployment data this morning came out lower than expected at 3.1%. KRW little moved on this. India iIP today was disappointing at 0.1pct yoy, the USDINR NDFs are a touch higher on this to 55.55 (the 1month).
The yuan and the ringgit are the outperformers of the Asian regionals this morning. Chinese Premier Wen said yesterday that China will meet the growth target (7.5%) thanks to proactive fiscal policy and a prudent monetary stance. USDCNY onshore spot continues it’s downtrend and it is down to 6.3265 this morning, USDCNH and the NDF market is following that lower. USDMYR broke an important support line at 3.0940 (the 3month low from last month) and stops have taken onshore spot down to 3.0765.
Stocks today are mixed, the Nikkei is in the lead with +1.7%, Shanghai is at the tail with -0.5%. SnP futures are up just 2 at 1433. Oil and precious metals are stable near recent highs today, Iron ore seems to be bouncing decisively off last week’s sub-90 lows, and is back to 100 now.
Busy day later. The German constitutional court votes on the ESM.
The Netherlands has a general election, the result is likely to be very close with the People’s Party and the Labour party very close in the polls. On the big issue of the moment both these parties are pro-EU and the anti-EU parties are not expected to do well.
We also have UK unemployment data and the USA has mortgage data.
FX options
Not much to report in the vols today. Most vols are very close to their long term lows, but have bounced modestly over the past 24hours.
1m JPY moved up from 6.3 to 6.9 yesterday with spot at new lows, today vols have been stable around the same level.
1m AUD and EUR are both a little bit higher today, 1m in both is 9.0 middle now. EUR gamma is better bid though, the 1wk is 10.8 middle so there is some event risk for today and tomorrow priced into the EUR curve. Not as much priced into the other currencies though.
1m AUD RR traded at 0.9 in the morning, close to recent lows, it came back bid at the time.
NATIXIS