Overall, the major currencies rallied against the dollar overnight. The only exception was the Japanese yen, which actually trades below the Asian open price. The rally seems to have been a reaction to the newly announced housing plan, but it is still uncertain at this point, since the equity markets did not have the same strong response. The currency market is likely to remain volatile, as the economic calendar holds some important releases today.
The Euro (Eur/Usd) rose tonight for the first time in the last five days. The pair gained almost 100 pips in the European session, bouncing off the 1.2550 support level. In the Asian session, the euro barely moved above the neutral pivot point (1.2565).
The Pound (Gbp/Usd) surged 170 pips in the overnight session, breaking above the 20-day simple moving average. Most of the moves came during the London open, after a very weak Asian session. For the moment, the pound is testing TheLFB R2 (1.4415).
In January, the M4 rose by £48.5 billion, or 2.5%, more than what analysts had predicted. Year over year, the M4 growth rate is standing at 17.5%. M4 lending excluding the effects of securitizations and loan transfers increased by £10.7 billion, seasonally adjusted in January. The twelve-month growth rate fell to 15.1% from 15.9% in December
The Aussie (Aud/Usd) rose 90 pips since the new trading day started, and it appears to be heading towards the 20-day simple moving average, the resistance area of the last few days of trading. The aussie’s calendar is clear of any reports for the remainder of the week, but tonight the RBA Governor is expected to testify in front of a senate committee.
The Cad (Usd/Cad) fell more than 100 pips during the overnight sessions, breaking below TheLFB S1 (1.2530), where the pair topped one day earlier. The cad is now trading just above the 1.2500 area, which in the recent past has acted as a very important swing point, holding the pair lower for almost three weeks.
The Swissy (Usd/Chf) moved lower in the early part of Asian trading, but by the end of the session, it had surged higher, testing the 1.1800 area. However, during the London open the swissy started again to move lower, breaking below the low set in the Asian session.
The Zew Indicator for Switzerland, gauging analysts’ economic expectations, improved in February to -57.7, from -66.7 one month earlier. However, the indicator for the assessment of the current economic situation dips by 4.6 points to the minus 45.3 level. The Swiss trade balance surplus surged in January. Compared with the estimated number, the trade balance was released much higher, 2.03B versus 0.62B. In December, the report was revised slightly lower, to 0.00B.
The Yen (Usd/Yen) moved less than 40 pips in the overnight session, even though the S&P futures advanced, and the other major currencies rallied during the European session. Earlier today, the BoJ had their monetary policy meeting, but failed to influence the pair.
The Bank of Japan decided by a unanimous vote to maintain the Overnight Call Rate at 0.10%. Having the lowest rate amid industrialized countries, economists argued that the low interest rate will not provide strong enough relief to the Japanese economy, and that the central bank has mostly depleted its powers to influence the business cycle by using monetary policy.