Euro dives lower today as Portugal's borrowing rates jump to euro-era record, and takes other major currencies lower against dollar. The 10 year Portugal bond yield hit 7.6% in the markets before falling back to 7.3%, not far from the point where Ireland was forced to bailout. It's rumored that ECB intervened in the government bond markets today for the time in two weeks to reverse the sharp jump in Portugal bond yields. There are talks that investors are getting impatient on the lack of concrete measures to tackle the Eurozone debt crisis. Also, there are additional support to the greenback as initial jobless claims dropped sharply to 383k.
ECB monthly bulletin note that inflation could temporarily increase further and are likely to stay slightly above 2 percent for most of 2011, before moderating again around the turn of the year. Also, the banks still expected that price developments will remain in line with price stability over the policy-relevant horizon. This in inline with what Trichet last week.
Sterling is relatively steady as supported by buying in crosses. BoE left the bank rate unchanged at 0.5% and the size of the asset purchase programme was held unchanged at GBP 200b. This is in line with general market expectation. No details are released from the statement. Instead, focus will turn to the latest inflation and output projections in the Inflation Report to be released on February 16. Also, minutes of the meeting will be released on February 23. Also released from UK, industrial production rose 0.5% mom, 3.6% yoy in December. Manufacturing production missed expectations and dropped -0.1% mom, rose 4.4% yoy.
Aussie is weighed down by mixed employment data today. The headline job growth beat expectation by increasing 24k in January while unemployment rate held steady at 5%, not bad. However, looking into the details, full-time employment dropped by -8k to 8.022m while part-time employment rose by 32k to 3.419m. The data add to speculation that RBA will be cautious in having another rate hike. It's believed that RBA would not raise rate again in Q1. The odds for two hikes this year, as implied by swaps, also dropped slightly after the data.
Other data released today saw Japan machine orders rose 1.7% mom in December, domestic CGPIU rose 1.6% mom in January. Swiss SECO consumer confidence rose to 10 in January. CPI unexpectedly moderated to 0.3% yoy in January. Canada new housing price index rose 0.1% mom in December.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.3646; (P) 1.3695 (R1) 1.3780; More.
EUR/USD's break of 1.3610 minor support suggests that recovery from 1.3510 has finished at 1.3743 already. Correction from 1.3860 is still in progress and should be resuming. Intraday bias is flipped back to the downside for 1.3510 and then 100% projection at 1.3393. However, larger outlook in EUR/USD remains cautiously bullish as fall from 1.4281 should have completed with three waves down to 1.2873. We'd expect downside of the current correction to be contained above 1.3253 cluster support (61.8% retracement of 1.2873 to 1.3860 at 1.3250) and bring rise resumption.
In the bigger picture, main question remains on whether medium term correction from 1.6039 has finished with three waves down to 1.1875. The firm break above 1.35 psychological level again affirm the case that fall from 1.4281 was merely a correction only and whole rise from 1.1875 is still in progress. Also, note that break of 1.4281 will revive the case that medium term correction from 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. On the downside, though, below 1.2873 will turn focus back to 1.1875 low.
Economic Indicators Update
|23:50||JPY||Machine Orders M/M Dec||1.70%||5.00%||-3.00%|
|23:50||JPY||Domestic CGPI M/M Jan||1.60%||0.30%||0.40%|
|00:30||AUD||Employment Change Jan||24.0K||20.0K||2.3K||1.8K|
|00:30||AUD||Unemployment Rate Jan||5.00%||5.00%||5.00%|
|06:45||CHF||SECO Consumer Confidence Jan||10||10||7|
|08:15||CHF||CPI M/M Jan||-0.40%||-0.20%||0.00%|
|08:15||CHF||CPI Y/Y Jan||0.30%||0.60%||0.50%|
|09:00||EUR||ECB Monthly Bulletin||--||--|
|09:30||GBP||Industrial Production M/M Dec||0.50%||0.50%||0.40%||0.60%|
|09:30||GBP||Industrial Production Y/Y Dec||3.60%||3.70%||3.30%||3.20%|
|09:30||GBP||Manufacturing Production M/M Dec||-0.10%||0.40%||0.60%|
|09:30||GBP||Manufacturing Production Y/Y Dec||4.40%||5.40%||5.60%||5.10%|
|12:00||GBP||BoE Rate Decision||0.50%||0.50%||0.50%|
|12:00||GBP||BoE Asset Purchase Target||200B||200B||200B|
|13:30||USD||Initial Jobless Claims||383K||410K||415K|
|13:30||CAD||New Housing Price Index M/M Dec||0.10%||0.20%||0.30%|
|15:00||USD||Wholesale Inventories Dec||0.80%||-0.20%|
|15:30||USD||Natural Gas Storage||-191B||-189B|
|19:00||USD||Monthly Budget Statement Jan||-69.5B||-80.0B|
|--||GBP||NIESR GDP Estimate Jan||--||0.01|