Data/Event Risks
- USD: The dollar was suffering into the close of Thursday. The US currency should be firmer if inflation is above expectations today (expected 0.5% rise in Feb), with Michigan confidence also worth watching at 13:55 GMT. Stronger reading would also be dollar supportive. See how to trade this event with EUR/USD.
- EUR: Every week, banks have the opportunity to repay some of their 3Y loans from the ECB taken out last year. EUR 229bln has been repaid so far, with last week a further EUR 5bln repaid. If there is big jump, then this would be taken as a sign of financial health, the ECB’s balance sheet would contract and would be taken as euro positive (as market interest rates would also rise in response, although only modestly).
- GBP:  Bank of England Chief Economist Spencer Dale speaks at 11:00 GMT today. He’s not see as a strong advocate of further QE at this time, so any hints of this will fuel expectations of more next month. Naturally, market will be sensitive to any comments on the currency. More: GBPUSD Making a Three Wave Rally (Elliott Wave Analysis)
Idea of the Day
If the dollar holds up today, then it will put in its 6th consecutive weekly gain on the dollar index (of which the euro makes up 57.6%), but after the losses into late Thursday, it could be a stretch. The last time this happened was in March 1999. Back then it the euro that was taking most of the strain, down nearly 9%, as the first easing of rates by the ECB under the single currency was anticipated. The Canadian dollar appreciated vs. the dollar over this period. Contrast this with the past 6 weeks and we’ve seen all of the major currencies depreciate vs. the greenback.
The message is that dollar strength this time is broad-based and a notable break from the historically narrow range that predominated September 2012 to January 2013. During this period, the dollar was largely a bystander to the currency wars being played out elsewhere. Now, the dollar is dominating and there is an increasing belief that this dominance could be here to stay.
Latest FX News
- AUD:  Holding steady after yesterday’s surge higher on the back of the very strong monthly employment numbers. AUDUSD is now sitting right in the middle of the range that has been established, namely 1.0115 to 1.0625 (mid-point 1.0370).
- GBP:  The pound rebound continued on Thursday. Initially this was in the context of broad dollar weakness and positioning, with short positioning most stretched for the UK currency. Later, there were some comments from Governor King suggesting that the Bank of England is not trying to influence the value of the currency. No great surprise with such a comment, but the market took it as another reason to cover short positions.
- JPY: The upper house of the parliament confirmed the nominations for the new BoJ officials, despite the wobbles seen earlier the week. The yen reaction was limited, although it was slightly softer during Asia, fighting off the stronger dollar seen into the European close.
Further reading: Beware of the ides of March.
