Overnight Headlines

  • Dollar, Franc Rise on Safety Demand Amid Oil-Driven Risk Aversion
  • Australian Dollar Follows Stocks Lower Despite GDP Pickup in Q4
  • NZ Dollar Tumbles as Prime Minister Key Calls for RBNZ Rate Cut

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3710

1.3821

GBPUSD

1.6154

1.6296

The Euro and the British Pound declined, sliding as much as 0.24 and 0.32 percent against the US Dollar as the greenback capitalized on broad-based risk aversion in overnight trade (see below). We remain short NZDUSD.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Monetary Base (YoY) (FEB)

5.6%

-

5.5%

0:00

AUD

HIA New Home Sales (MoM) (JAN)

2.5%

-

-0.6%

0:30

AUD

Gross Domestic Product (YoY) (4Q)

2.7%

2.8%

2.7%

0:30

AUD

Gross Domestic Product (QoQ) (4Q)

0.7%

0.7%

0.1% (R-)

The safety-linked US Dollar and Swiss Franc outperformed in overnight trade as Asian stocks followed Wall Street lower, with the MSCI Asia Pacific regional benchmark equity index down 1.3 percent after oil prices shot higher, probing back above the psychologically critical $100/barrel level on the WTI contract. Crude closed at the highest level in 29 months after the American Petroleum Institute reported that inventories fell the most in two months last week. Spreading unrest in the Middle East compounded upward pressure, with the International Energy Agency reporting that the crisis in Libya has derailed as much as 850,000 barrels a day of output while Iran - the world's third-largest oil exporter - moved to arrest opposition leaders to prevent the outbreak of protests.

The New Zealand Dollar has dropped dramatically against all of its major counterparts, hitting a two-month low against its US namesake and after Prime Minister John Key spoke out in favor of an interest rate cut after the worst earthquake in 80 years that rocked the city of Christchurch last week. Key said the government would welcome a decrease in benchmark borrowing costs, adding: the market has priced in a cut [and] that would probably be my expectation.

Australian Gross Domestic Product figures printed in line with expectations, showing the economy accelerated to add 0.7 percent in the fourth quarter after a disappointing 0.1 percent increase in the three months through September. The Australian Dollar found no support in the outcome after the RBA established a firmly neutral outlook on interest rate hikes with yesterday's monetary policy announcement, with the risk-correlated currency following shares lower to shed as much as 0.3 percent against its top counterparts.

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

-

GBP

Halifax House Price (3MoY)

-2.2%

-2.4%

Low

-

GBP

Halifax Plc House Prices s.a. (MoM)

-0.6%

0.8%

Low

9:30

GBP

Purchasing Manager Index Construction

-

53.7

Low

10:00

EUR

Euro-Zone Producer Price Index (MoM)

1.0%

0.8%

Low

10:00

EUR

Euro-Zone Producer Price Index (YoY)

5.6%

5.3%

Low

The economic calendar is fairly light in European hours, hinting broad sentiment trends will remain the core driver of currency market price action. Stock index futures are pointing sharply lower, suggesting risk aversion will carry forward into the coming session and promising continued gains for the safe-haven US Dollar and Swiss Franc. Official crude inventory figures from the US Department of Energy will be closely watched as well given the oil-linked nature of the selloff as they cross the wires late into the session.

The Euro Zone sovereign debt crisis may reemerge as a further headwind for risk appetite as Portugal moves to refinance a tranche of bonds at what will likely prove to be materially higher borrowing costs, raising fears that servicing the debt may prove unwieldy for debt-strapped member states. A further $28.7 billion in Greek and Spanish debt is due to mature over the next 30 days. Periphery credit-default swaps are edging higher in late Asian trade.