Unconfirmed reports of explosion in New York – gas leak said to be the cause

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  • Unconfirmed reports of explosion in New York – gas leak said to be the cause
  • 50th and 9th

Twitter reports only at this stage

Author: Eamonn Sheridan

Eamonn Sheridan worked with Bankers Trust Australia for 13 years as a Spot foreign exchange dealer, trading across all major currencies and all time zones. He rose to a Vice President position, running spot operations during the busy European time, leaving the bank just prior to it being sold to concentrate on running his own business in the ‘real world’! The markets, however, had him hooked – he continued to trade equities, CFDs and then on to futures, giving him broad experience across financial markets. He is now active in FX and equity index futures as well as writing for ForexLive™. Eamonn is a graduate of The University of Melbourne in Australia and lives in New South Wales.

2014-02-03T03:42:27+0000

All|Asia Pacific|Market Rumors

Eamonn Sheridan

4 Comments

  1. Eamonn, would you know if there is any change in the emerging market hysteria? Has this been contained or should we expect another blood bath this week?

  2. Hi Don
    At this early stage of the week its probably a bit early to tell.
    The European timezone is going to give us a better picture.
    These things tend to calm down more often than they continue to flare up, (there can only be one end of the world after all), but it’s the continued flare ups that are the killers of course.
    Watching Europe when they come in now …

    If the kiwi and usd/jpy strength are anything to go by, things are looking better

  3. Thank you Eamonn. The U.S. data has been mixed but on the bad side and blue chip earnings are not great either. I’m concerned this thing can’t be contained and will cause a capital flight to safety scenario in the U.S. and Europe too. I will watch NZD/USD for sure.

  4. Don,
    Here are some comments from RBS weekly outlook – they talk about EM and what to watch for too:

    RBS: Key Global Currency Themes This Week:
    The Fed and the Labour Market | A more abrupt sell off in EM and risk positive markets will most likely come when short-end US rates start to rise. We are growing more concerned about the continued decline in the US labour market participation rate. We also sense that we are not alone in raising our jitter index over labour market developments. If the multi-year decline in the participation rate turns out to have been structural and not cyclical as many hope, then the Fed may become less comfortable keeping rates low for such an extended period. New Fed Chair Yellen is a Phillips Curve proponent and she is on record as saying that inflation is primarily dictated by slack in the labour market. Any sign that Yellen is shifting her view that the decline in the participation rate is structural should be taken as a green light to position for multi quarter USD gains. This means that the unemployment rate and the participation rate in Friday’s payroll report (consensus 180k, last 74k) may see more focus than normal. With our colleagues in US Economics seeing downside risks to the unemployment rate, we expect USD/JPY to trade strongly through the release. However, we believe that it is too earlier to start building short GBP/USD and EUR/USD positions.
    EUR and ECB Deflation Watch | The ECB has set the hurdle for further policy action relatively high by saying that while the Council expects a prolonged period of low inflation, they didn’t consider a rate cut at the January meeting. Forward looking indicators of growth have been consistent with a gradual improvement in the economy since the last policy meeting. This week’s regional PMIs survey should be no different. EONIA markets have also been relatively well behaved, but the debate has moved on to hardening disinflation pressures. Our colleagues in European Economics now expect a 15bp cut in the refi rate. Even if the Council do not vote for a cut this week, the EUR would be vulnerable if Draghi were to say that the risks to inflation have moved to the downside from previously having been seen as balanced. Yields have moved pretty steadily in favour of a lower EUR/USD over the last year without the currency pair showing signs of weakening significantly. This looks primarily due to easing periphery worries and the Fed’s QE policy providing a powerful offset to lower Euro area yields. Hence, while we think EUR/USD may trade weakly into next week’s ECB meeting, noticeable declines will most likely need a significant reassessment of the future path of US monetary policy and/or renewed stress in the periphery.
    BoE guidance tweak coming…but not this week | A change of guidance looks set to come with the publication of the next Inflation Report (February 12th) rather than this week’s BoE policy meeting. We may not even get a statement, though the risks are obviously greater than usual given the proximity of the unemployment rate to its threshold. Our current baseline is that the BoE policy framework will be augmented by an additional fan chart for a new base rate projection, similar to those presented by the Riksbank and Norges Bank. A change in guidance looks to have become the mainstream consensus, especially after Carney’s fairly explicit comments over the past week on the need for the BoE framework to evolve. Hence we see only modest GBP weakness on any change in guidance unless it’s consistent with a change in its reaction function. Given that high frequency data continue to highlight the relative out-performance of the UK and that some of the short-term tail risk for the economy have hence flattened somewhat, we continue to look for GBP to trade fairly firmly this week. After last week’s lower than expected German CPI print (EUR and ECB Deflation Watch), we look for EUR/GBP to trade lower, potentially down as far as 0.80.
    Friday’s UK trade balance will inform on the medium term (negative) risks for GBP from a possible significant deterioration in the Balance of Payments due to the policy mix in the UK relative to its main trading partners. While this is set to be a slow burning theme this year, the data will inform on how quickly imbalances are growing. Increased concerns about widening imbalances (BoP, fiscal deficit and household balance sheets) are the primary reasons why we continue to expect GBP/USD to trade lower in H2:14 (FX Monthly | Europe).
    Not just about Turkey | The market’s fixation with the TRY clearly reached fever pitch last week ahead of Tuesday’s emergence central bank policy meeting. We believe that it’s unwise to view recent moves in Turkish assets as the primary driver of increased volatility in Emerging Markets and risky assets more broadly. Rather, we see longer term themes such as 1) heavily owned EM positions, 2) weak fundamentals and 3) a structural adjustment to higher global yields/reduced liquidity as underlying drivers. We also believe that it would be unwise to see the recent increase in volatility as an indication that positions have already been trimmed significantly. Last summer’s EM sell-off and continued reports of deleveraging and reduced risk appetite of commercial banks suggest that smaller flows are likely to be having a greater impact on price than they did historically. Global asset markets are going to have to adjust to higher real USD borrowing costs in 2014. As such, we continue to expect a “shift from just the most fundamentally flaky towards the fundamentally stronger, therefore the most liked and therefore the most heavily owned” Global Currency Themes. This leaves us preferring positions that have potential to benefit from weakness in the MXN, PLN and CNH.
    Nordics & Macro Prudential Watch | Soft retail sales data and consumer confidence numbers play to the view that Sweden’s domestic economy is coming under increasing pressure. Continued recovery in Germany may provide a partial offset to some of the negatives given the country is Sweden’s main trading partner. The outlook for Norway looks more troublesome. Execution risk around the introduction of macro prudential policies is something that we identified as far back as May last year following our return from our yearly Nordic fact-finding trip. Rising unemployment is of particular concern given Norwegian households are heavily indebted. Last week’s data showed the first back-to-back quarterly annual declines in house prices since the beginning of the financial crisis. Pressure on the NOK may build given that the exit window from Norwegian asset markets can be relatively narrow. While we marginally favour the SEK over the NOK, we expect EUR/NOK and EUR/SEK to trade higher on reduced Euro area tail risks. Both currency pairs are expected to be negatively correlated to broader risk appetite. This is a notable change from the heights of the Euro area sovereign crisis where the SEK, and to a lesser extent the NOK turned out to be ‘relative’ safe havens. Reduced tail risks for the UK economy at the margin also reduce their ‘relative’ appeal versus GBP. Stay long GBP/SEK, GBP/NOK as a Top Theme and Trade 2014.
    Open Season for CAD | It’s noteworthy that the CAD traded consistently weakly through last week’s EM various gyrations. To us, this is evidence that downside CAD pressure on structural concerns over energy trends in North America and the impact on Canada’s current account continue to be a ‘stay with’ theme for many investors. The recent dovish tilt to central bank comments also play CAD negative, in our view This story is likely to have further to run. This week we’re set to get updates on international trade and manufacturing sentiment (Ivey PMI). The former will inform on whether trade flows are moving against the CAD more forcibly. Long USD/CAD.
    Antipodeans & Monetary Policy | While the RBA may indicate that it’s become more comfortable with the current level of the AUD, it’s likely to say that it’s still too high. The central bank may sound somewhat less dovish on rates in line with higher Q4 inflation, some improvement in business conditions and a surging housing market. However, recent soft labour market data and some additional global uncertainty may help keep the rates outlook balanced. We see some upside risk for the AUD and rates on a somewhat less dovish sounding RBA, although the currency will be heavily influenced by Chinese data. While the RBNZ disappointed some by not raising rates at last week’s policy meeting, it was made clear that monetary policy will be tightened at the next meeting in March. Financial markets have now priced in rate rises at the next two meetings. This limits the scope for NZD gains on yields alone. Long GBP/NZD, long AUD/NZD.

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