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Where The EUR/USD Goes Today

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Guest wsrnetwork

An early attempt by the USD to push higher failed to gather much traction as the European session got underway. EUR/USD failed to sustain a dip below USD1.4500 despite a EUR negative FT report that Portugal faces the risk of a downgrade. While USD/JPY remains off its overnight lows it continues to struggle to pull back to 92.50. Friday’s US payrolls data proved that the market had got too far ahead of itself with respect to optimism on the US economy. The slowdown in job losses did slow markedly during Q4 (to a monthly average of -69K from -199K in Q3), but the USD was priced for a return to job creation in December to sustain its view that the Fed is on the cusp of changing its policy stance.

 

Comments from the Fed’s Bullard in Asian hours that rates would remain low “for quite some time” were another blow to sentiment to the USD. Going forward, the market is likely to come to terms with the outlook that while the worst is likely over for the US economy, 2010 will likely prove to be a tough year for economic growth. The USD, however, is likely to garner some support from the outlook that the Fed is likely to be out of the starting blocks well ahead of the BoJ and the ECB with respect to rate rises this cycle. Now that payrolls data are out of the way and with this week’s data calendar relatively light attention can be expected to turn towards US earnings session which kicks off today.

 

Strong Chinese exports data overnight underpinned risk appetite. Exports rose 17.7% y/y in December boosting expectations for economic growth in the region. Chinese lending data was also strong. This will ensure fears remains about the potential for asset price bubbles in China though these fears will be soothed to some extent by measures announced by the State Council aimed at cooling the property market. AUD/USD has clawed its way up to USD0.9319 this morning aided by a rise in job vacancies to a 2.5 year high. The strong labour market is rekindling expectations that the RBA could hike rates again in Feb. Strong house price data in NZ has helped push the NZD above USD0.7400. USD/CAD, however, has backed off from a test of 1.0250.

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