The euro has been unperturbed by an indecisive election in Spain, which threatens reform progress there, while sterling steadied after an early Asia dive. EUR-USD logged a peak of 1.0883 before ebbing to a narrow range around 1.0850, near net unchanged for the day. ECB member Vasillauskas said that it is not worth speculating on whether there will be addition stimulus at the present juncture, and German PPI also came in south of expectations, at -2.5% y/y in November after -2.3% in October. The pound took a dive in the early Asia-Pacific session in reaction to remarks made by BoE MPC Weale in an interview with the Telegraph newspaper, who said that "the factors pushing down on inflation have become a bit more prolonged." Cable dipped to a low of 1.4886 before rebounding above 1.4900, only to then ebb back under 1.4900. Last week's trend low at 1.4865 has remained untroubled. Elsewhere, EUR-USD rose above its Friday peak in making 1.0883. USD-JPY clocked a one-week low of 121.03 before lifting somewhat, leaving an intraday high at 121.50. The PBoC set the yuan midpoint firmer today following 10 consecutive days of weakening.
[EUR, USD]
EUR-USD logged a peak of 1.0883 before ebbing to a narrow range around 1.0850, near net unchanged for the day. ECB member Vasillauskas said today that it is not worth speculating on whether there will be addition stimulus at the present juncture, though to little market impact with activity and trading impetus now muted by the year-end holiday season. German PPI also came in south of expectations, at -2.5% y/y in November after -2.3% in October. We expect incoming U.S. data to remain net positive, which should keep EUR-USD's bias to the downside. Initial focus is on the Dec-7 low at 1.0796. The 50-day moving average at 1.0905 marks resistance.
[USD, JPY]
USD-JPY clocked a one-week low of 121.03 before lifting to an intraday high at 121.50. The yen has settled after the high volatility of Friday, which was seen after the BoJ announced it would buy more ETFs and extend the duration of the bonds it buys in its QQE program. USD-JPY had spiked to a 123.56 peak on this news before reversing sharply lower as markets realized that the new policies are in fact quite small. The central bank detailed that it will buy an extra Y300 bln a year in equities, and that it will start accepting foreign-currency bonds and housing loans as collateral, which is aimed at addressing concerns that the BoJ is running out of assets to buy as it will make it easier for banks to sell JGBs. USD-JPY looks likely to trade without much direction into the new year.
[GBP, USD]
The pound took a dive in the early Asia-Pacific session in reaction to remarks made by BoE MPC Weale in an interview with the Telegraph newspaper, who said that "the factors pushing down on inflation have become a bit more prolonged," and there had been a surprising "pause in wage growth," the upshot of which was a "slightly less immediate" need to tighten policy. Cable dipped to a low of 1.4886 before rebounding above 1.4900, only to then ebb back under 1.4900. Last week's trend low at 1.4865 has remained untroubled. With the BoE's version of rate lift-off still some six months down the track, and data dependent, we anticipate Cable will grind lower. Initial focus is on last week's low at 1.4865. Resistance is now marked at 1.5000 and 1.5029-30.
[USD, CHF]
EUR-CHF continues to trade heavily, last week making daily closing lows below 1.0800 for the first time since mid-November. The cross logged a one-month low of 1.0756 on Friday. We still expect EIR-CHF to remain comfortably above the sub-1.0500 levels that prevailed earlier in the year before the SNB cut the deposit rate to -0.75%.
[USD, CAD]
USD-CAD is trading softer today after clocking to a new major-trend peak of 1.4001 on Friday. The combo of higher U.S. yields and low oil prices have been underpinning the pair, which is up by over 4% over the last two weeks (measured with spot at 1.3920). Support is marked by the former high at 1.3781, while 1.4000-01 marks resistance.
