Wednesday, January 19, 2011

EUR Back On Track Higher, Taking Out Further Stops On The Way

Australia reports weak consumer confidence as a result of the flooding
* US Jan. Empire Manufacturing out at 11.92 vs. 12.5 expected and
revised 9.89 prior
* CA BOC leaves rates unchanged at 1.0%
* US Nov. Net Long-term TIC Flows out at $85.1b vs. $40.0b expected
and revised $28.9b prior
* US Jan. NAHB Housing Market Index out at 16 vs. 17 expected and
unchanged from prior
* US Weekly ABC Consumer Confidence out at -43 vs. -40 expected and
-40 prior
* AU Jan. Westpac Consumer Confidence out at -5.7% m/m vs. revised
+0.3% prior
* JP Nov. Tertiary Industry Index out at +0.6% m/m vs. 0.5% expected
and revised 0.3% prior
* AU Jan. DEWR Skilled Vacancies out at -4.6% m/m vs. revised -4.0%
prior
* JP Dec. Tokyo Condominium Sales out at +40.8% y/y vs. +0.8% prior
* EU Euro-zone Current Acct Balance (0900)
* UK Claimant Count Rate (0930)
* EU Construction Output (1000)
* US Weekly MBA Mortgage Applications (1200)
* CA Manufacturing Sales (1330)
* US Housing Starts (1330)
* US Building Permits (1330)
* CA BOC Monetary Policy Report (1530)
* UK BOE's Posen to speak (1700)
* EU ECB's Stark to speak (1800)

*Market Comments*
With only second-tier data scheduled for the Asian session, initial
ideas were that we would sit in tight ranges on the day. However this
was not to be the case as stop-loss hunting became the name of the
game and EUR soon found itself back at yesterday's highs. While there
was no increase in the European crisis fund announced after the EU
finance ministers' meeting, thoughts that at least discussions to give
the rescue fund more flexibility were heading in the right direction
were enough to give the EUR traction higher.

Of the data releases, Australia's consumer confidence as measured by
Westpac showed a steep fall in January, though the data was collated
at the height of the flood period and hence not entirely unexpected.
On a more positive note it was reported that Australia's coal mines in
Queensland were back to full-staffing levels.

With the slew of Chinese data due tomorrow the (often reliable)
whispers were doing the rounds in Asia. Major surprises were few and
far between however, with CPI seen at the high end of current
forecasts (4.3-4.6%), retail sales a touch weaker than the 18.7% y/y
expected and industrial production more-or-less in line.

Looking at yesterday's action, stronger European data had given the
EUR an early boost, powering the single currency back above 1.34
versus the dollar, and eventually touching just above last Friday's
high. Loose chatter that Portugal may skip next week's auction due to
the fact they currently have enough cash helped the final push higher,
while Russia intimating that they may also support the EFSF lent
further support. All was not hunky-dory however, with the Dutch
finance minister rejecting the idea of expanding the emergency fund
while the ECB said it expects more banks to fail stress tests this
year than in 2010. GBP was also better bid as inflation remained
persistently high (CPI rose 1.0% m/m and 3.7% y/y), well above the
BOE's target level and fueled talk of imminent rate hikes. Consumer
confidence also rose.

On the US data front, January's empire manufacturing improved from the
previous month but fell short of expectations. Nevertheless, the
details showed relatively encouraging data, particularly in the new
orders category, while employment and outlook indices were also
better. The weekly ABC consumer confidence index deteriorated to -43
from -40, giving back some of the positives from the previous week.

Further north, Canada maintained rates steady at 1%, noting that the
global economy was expanding more quickly than previously expected,
enabling a marginal increase in the BOC's growth forecasts to 2.4% for
2011 and 2.8% for 2012.

For Europe, today we concentrate on Euro-zone current account and
construction output along with UK unemployment. For the US session,
focus switches to Canada's manufacturing sales and the BOC's monetary
policy report while the US sees building permits and housing starts
Source: ActionForex.Com

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