The anticipation ahead of the weekend G8 meeting failed to morph into something considerable by the start of trading this week, yet the EUR seems surprisingly resilient in Asia.
Markets were anticipating some urgency into this weekend’s G8 meeting but the final statement left many issues hanging. Aside from a firm affirmation that Greece should stay in the Euro (while respecting its commitments), the familiar “we commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses “ was trotted out though there was recognition that the “right measures are not the same for each of us”. Is this an indication that German Chancellor Merkel is softening her austerity stance or does this mean growth and austerity at the same time, with each member doing his own thing at his own pace, as it suits? Either way, it’s not a healthy plan and short-term positives will continue to be long-term negatives. Focus now shifts to the next EU summit on May 23, though expectations are likely to be low.
However, the EUR proved to be surprisingly resilient during the Asian session with an early kneejerk lower open (only a matter of 30-40 points) soon rebuffed and we pushed higher through the 1.28 mark versus the US dollar by early-morning with stops triggered along the way. From a technical perspective, analysts note a turn in momentum indicators (both RSI and Stochastics) combined with an outside-range day on Friday while latest IMM reports show EUR shorts at record levels. Note the 38.2% Fibonacci retracement of the May down-move is at 1.2886.
EURUSD Daily Chart
Aside from the G8 outcome, there was little to occupy currency markets in Asia. The UK housing market, as measured by Rightmove’s house prices, is still in a moribund state with prices flat on the month in May and up 2.0 percent y/y compared with increases of 2.9 percent and 3.4 percent respectively the previous month.
Bearish momentum for the EUR, which had been active since the start of May, appeared to run out of steam on Friday, despite touching a new cycle low of 1.2642. Short covering ahead of the weekend was the theme for late-Europe and early NY, with the single currency managing a big figure bounce ensuring EURUSD’s highest close in 3 days.
There was no data to influence Friday’s US session though Canada’s CPI data provided some marginal input for CAD traders. Inflation was marginally above expectations both on a month-by-month and year-by-year basis, registering +0.4 percent and +2.0 percent respectively. While the change in CAD yields was small, the CAD did firm slightly to a 1.0137 low before the broader short-covering ensued.
Data Highlights
CA Apr. CPI out at +0.4% m/m, +2.0% y/y vs. 0.3%/1.9% expected and 0.4%/1.9% prior resp.
CA Apr. Core CPI out at +0.4% m/m, +2.1% y/y vs. 0.2%/1.9% expected and 0.3%/1.9% prior resp.
UK May Rightmove House Prices out at flat m/m, +2.0% y/y vs. 2.9%/3.4% prior resp.
NZ Apr. Credit Card Spending out at +0.2% m/m, +3.7% y/y vs. revised 0.4%/5.3% prior resp.
Upcoming Economic Calendar Highlights
(All Times GMT)
JP All Industry Activity Index (0430)
JP Leading Index (0500)
JP Coincident Index (0500)
Swiss Consumer Confidence (0545)
EU ECB’s Asmussen to speak (0700)
Swiss M3 Money Supply (0700)
EU Construction Output (0900)
US Fed’s Lockhart to speak (0915)
US Chicago Fed Activity Index (1230)
Andrew Robinson,
SAXO BANK