10 minutes ago | October 20th, 2014 11:05:23 GMT

ForexLive European morning wrap: USD retreats in a steady start to the week

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Forex news from the European morning trading session 20 Oct

News:

Data:

It’s been a fairly subdued start to the week, certainly compared to the flows we were seeing last week and it’s the greenback’s turn to go on the retreat

USDJPY had an early lift to 107.39 on a a firmer Nikkei into the close but since then it’s drifted back below 107.00 while USDCHF has once again failed to get above 0.9480 in Asia and spent most of the session on the back foot as EURCHF dropped to 1.2060 and EURUSD edged its way to 1.2779 highs

GBPUSD had an early wobble to 1.6093 but then made a steady advance to 1.6149 before being capped by offers at 1.6150 and bids on EURGBP at 0.7910 after its earlier look above 0.7930.

USDCAD drifted down to test bids at 1.1250 while AUDUSD and NZDUSD have largely had the morning off.

Not exactly an inspiring start to the week but we’ve had opportunity, albeit almost in slo-mo, and can expect better volatility to come.

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24 minutes ago | October 20th, 2014 10:50:42 GMT

Morgan Stanley load up on EUR/JPY shorts at 137.00

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Those lovable rogues at Morgan Stanley have gone and gotten themselves all shorted up in EUR/JPY at 137.00. They’re off to a flyer as it currently trades 136.71 and they are hoping to take profit at 131.50. If it all goes “Pete Tong” (wrong) they’ll be stopped out at 138.50.

They’re definitely trading with the trend right now and their take profit point is just above substantial support at 131.10/15.

EUR/JPY Daily chart 20 10 2014

EUR/JPY Daily chart 20 10 2014

Will Morgan Stanley ring the profit bell on EUR/JPY short?
Get in the hole!!
They'll find the water

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1 hour ago | October 20th, 2014 10:12:21 GMT

The pound enjoys a solid start to the week

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See ? I can write about the up moves too.. lol  ( all the better for selling GBP at preferred levels!)

GBPUSD grinding its way higher in solid fashion this morning with highs so far of 1.6135 from an early wobble to 1.6093. Offers noted into 1.6150

EURGBP had an early look above 0.7930 but it found some decent resistance and has dribbled back down to 0.7915. Bids noted between 0.7900-10

GBPJPY still enjoying its ride back up from the lows around 169.00 and now finding buyers in the dips to 172.00 although yet to break back above 173.00

Some GBP short covering noted generally amidst the ongoing US/UK interest rate hike deliberations

All delicately poised still as someone here often writes ( Oh yea, that’ll be me ! )

 

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1 hour ago | October 20th, 2014 09:53:03 GMT

BIS warns of the perils of cheap money

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BIS chief economist Claudio Borio in today’s Die Welt newspaper and reported by our friends at Livesquawk

From a global perspective, the current monetary policy could contribute to the dangers for financial stability.

Interest rates are globally too low to guarantee price stability and financial stability.Companies are not using the cheap cash to invest. Managers have preferred to use the money to finance takeovers or share repurchase schemes rather than in their own business. That’s a clear signal that something is amiss

A timely word of warning from the Bank for International Settlements, the clearing bank for the CBs, as the debate rages over when “normalization” or at the very least a rate hike might happen in the UK and US, as well as the dangers of over-extending easy money in the Eurozone

 

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1 hour ago | October 20th, 2014 09:45:13 GMT

UK SME’s still tightening their belts says BOE lending report

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The BOE’s quarterly lending report “Trends in Lending” has found that SME’s would still prefer to repay debt than borrow new money.

Overall lending to private non-financial companies in the three months to August was more or less flat q/q but showed a drop against a the same period a year ago. The real estate sector led most of that weakness and accounted for around 30% of the total stock of loans. Other industrial sectors other than real estate limited the fall in lending.

BOE quarterly lending report 20 10 2014

BOE quarterly lending report 20 10 2014

The consumer continued to increase borrowing, which increased to 6.1% y/y in August on credit borrowing. Unsecured lending rose to 6.8% y/y.

BOE consumer credit 20 10 2014

BOE consumer credit 20 10 2014

There’s some worrying news within the report, particularly the consumer numbers. The BOE are happy to point out that we’re still below pre-crisis levels but the the direction on the chart above shows that we’re heading back to those levels. If it continues then there’s going to be more than a few pockets pinched when rates go up. It seems that either people are still not clued up enough that they should have been reducing their debts or that there are many who are still reliant on the old plastic to get through the month. No one should really be crunched by a 0.25% rise in rates but if they’re up by 2% in and around the next 2 years people will feel the heat.

The drop in borrowing to the real estate sector is probably something we saw in the recent drop in construction data for August, and it’s something that may cause the sector to continue to fall.

On the upside, the fact that companies are still reducing their debts is good news. It might paint a picture of weak lending but it makes for stronger company finances which is what will help keep the economy moving forward, although it might mean it moves at a slower pace.

The consumer aspect is the one we need to keep a close eye on but aside from that, the report doesn’t suggest (right now) that we’re heading for another big blow up in borrowing that will end in tears 10 years down the line.

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1 hour ago | October 20th, 2014 09:31:34 GMT

China’s GDP to drop dramatically over the next 10 years

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So says an article in the WSJ which highlights that China’s growth will slow sharply during the coming decade to 3.9% as its productivity nose dives and the country’s leaders fail to push through tough measures to remake the economy, according to a report expected to come  out today.

Such a dramatic drop could seriously impact on an already fragile global recovery but the WSJ also reports that

 the business-research group the Conference Board also finds that multinational companies in China would benefit. Lean times would give foreign firms more local talent to choose from. Foreign companies and investors could also expect “more hospitable” treatment from Communist Party and government officials and a wider selection of Chinese firms they could acquire, according to the report, which was shared with The Wall Street Journal.

Says the Conference Board

Foreign companies should realize that China is in a long, slow fall in economic growth.The competitive game has changed from one of investment-driven expansion to one of fighting for market share.

Officials representing China’s State Council referred questions to its National Bureau of Statistics, which didn’t respond. Senior officials of the Communist Party are gathering in Beijing for a major policy meeting that opens today and is expected to discuss the slowdown.

The Conference Board forecasts that China’s annual growth will slow to an average of 5.5% between 2015 and 2019, compared with last year’s 7.7%. It will downshift further to an average of 3.9% between 2020 and 2025, according to the report.

China is scheduled to report its third-quarter economic growth tomorrow (Tuesday).

More from the WSJ article here on subscription

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2 hours ago | October 20th, 2014 08:48:35 GMT

Rapid moves in currency undesirable says BOJ’s Umemori

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  • Will closely watch impact of FX moves in Tokai region
  • Impact of FX moves vary by industry
  • Many firms in Tokai central Japan region feel that rapid FX moves whether up or down are undesirable

Umemori is the Nagoya branch manager of the BOJ. The Fukuoka branch manager is also speaking in Tokyo and also says that abrupt moves are not desirable for firms.

I’m still maintaining that there’s a good chance we’ve found a desirable range for JPY between 100-110 as there’s less talk from Japan about it weakening further which has now been added to by the Fed passing comment on USD strength. There may be enough left in the tank to run up above 110 but I feel that the upside is limited.

The spotlight is on the Tohoku region today as it was the only region to cut its economic outlook today in the BOJ’s quarterly report.

 

4 Comments

2 hours ago | October 20th, 2014 08:38:34 GMT

CML UK mortgage lending -1% in September

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The council for mortgage lenders is out with their monthly report and while lending was down 1% (£17.8bn vs £18bn) from August it was up 10% vs September 2013 (£16.2bn)

On a quarterly basis, Q3 2014 was up 8% q/q and 13% y/y

“Uncertainty over when we will see the first increase in UK base rates is exacerbated by weaker growth prospects in several major economies, including the eurozone.

“Recent indicators and policy actions corroborate our view of a gentle easing in market conditions. There is growing evidence that mortgage lending activity, and the housing market, are sitting on a plateau.” said Bob Pannell at the CML

We’re still seeing falls in borrowing but to to any major degree that would warrant being worried over house prices. October data will be more important as that’s when the new mortgage rules came into force

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2 hours ago | October 20th, 2014 08:34:42 GMT

More from the orderboard 20 Oct

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USDCHF currently 0.9447 still finding stepping above 0.9480 a step too far

Sellers  0.9470-80 0.9500 0.9525 0.9560 0.9580 0.9600-10

Buyers 0.9425 0.9400 0.9385 0.9350-60

 

EURCHF currently 1.2060 on session lows having also had its rally capped at 1.2080

Sellers  1.2085 1.2100 1.2125-35 1.2150 1.2165

Buyers 1.2040-50 (reported SNB interest) 1.2000 (SNB cap)

 

USDCAD currently 1.1264 also in retreat mode but bids in the dips still

Sellers  1.1300 1.1325-30 1.1350 1.1375-85 1.1400 (barrier option- stops above)

Buyers 1.1250 1.1225-35  1.1220 1.1200 1.1180 1.1150

 

NZDUSD currently 0.7944 in range trading mode

Sellers 0.7965-75 0.8000-10 0.8025 0.8050

Buyers 0.7925 0.7900-10 0.7875 0.7840-50 0.7800

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2 hours ago | October 20th, 2014 08:21:54 GMT

EURJPY orders 20 Oct

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Currently 136.60 still stuck in a relative rut

Sellers 136.80 137.00-10  137.30 137.50 138.00

Buyers 136.30-35 136.00 135.75 135.50 135.20-25 135.00

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