Data/Event Risks
- USD:Â Data focus is on new home sales, which have been on a modestly improving trend for the past 18 months now, but not a big risk for the dollar unless substantially out of line from expected
- GBP: Big focus on the Q4 GDP numbers. Recall that Q3 was strong (0.9%) owing to various one-off factors, not least the Olympics. Q4 is seen back to reality, which the market sees as -0.1%. Sterling would be vulnerable to weaker number, not least because talk would increase of a triple-dip recession. See how to trade the British GDP with GBP/USD.
- EUR: Beyond German Ifo data, focus on repayment of ECB loans. Sounds boring, but it’s important because the ECB balance sheet could start contracting at a time when other central banks (US, Japan) are still expanding theirs and this could be taken as another euro positive angle. ECB lent to banks for 3 years, with option of repayment after 1 year, with today being the first opportunity for banks to exercise that option. Big take up would boost the single currency. Announcement expected 10:00 GMT.
Idea of the Day
Today is already shaping up to be a fairly crucial one for FX markets and beyond. Overnight we’ve seen new cyclical highs on both USDJPY and EURJPY, threatening a new leg of the yen weakness story. The Japanese inflation numbers underlined just how far the country has to go to stand any chance of achieving its 2% inflation goal. Elsewhere, EURUSD has pushed through the top end of the 1.3249 to 1.3404 range that has held for 2 weeks now, with this triggering some stops early in the European session. Meanwhile, after yesterday’s sell-off, gold sits just above the 200d moving average currently at 1,663. Sterling is also eyeing some key levels ahead of the GDP numbers at 09:30 GMT. Key Fibonacci levels (50% retrace) comes in at 1.5789, whilst EURGBP set-up for further gains after breakout from bull channel.
Latest FX News
- JPY:  New cyclical highs for USDJPY overnight at 90.69. CPI data was broadly in line with expectation, but continued deflation (headline inflation at -0.1% YoY) underlined just what a monumental task the BoJ has in having any chance of achieving its new 2% inflation goal.
- EUR: A break of the established range that has held for 2 weeks (1.3404 marking the top) has triggered stops early on in the European session. Sustained break above here could spur some further buying into the end of the week. EURJPY made new high at 121.42 overnight.
- GBP:  Sterling ending what has been a week of weakness, which brings with it the risk of some short-covering, especially if today’s GDP data is weaker than expected.
- GOLD: After yesterday’s sell-off, gold is looking a little more vulnerable, currently sitting just above the 200d moving average which is at 1,663.
Further reading:Â What is the outlook for GBP in the coming weeks?
