14th of February 2011 - Fundamental Forex Market Overview

DAILY MARKET COMMENTARY
14 February 2011 – 8:00 GMT
Monday

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Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
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FUNDAMENTAL ANALYSIS at 0800 GMT

USD

Dollar performance was mixed during the Asia session with the greenback holding on to Friday's gains against the euro, but surrendering some ground to the yen. The Nikkei-225 is currently up more than +1.1%. Indeed Asian equities are broadly higher after official confirmation on Friday evening that Egypt's Mubarak has stepped down as president and has ceded control to a military council. EURUSD traded 1.3501-1.3554 and USDJPY traded 83.15-83.57. The big mover overnight was AUDUSD, although this seemed to be driven more by a general risk-on theme rather than the stronger than expected Australian lending data or the exceptionally strong trade data out of China. News of Mubarak's departure helped the S&P 500 finish up +0.55% on Friday, and contributed to a fall in WTI crude which closed over $1/bbl lower on the day. The University of Michigan confidence index in early February came in slightly ahead of expectations at 75.1 (cons. 75.0, prev. 74.2). There are no US economic data releases scheduled for today. We remain bullish on the dollar given the trend towards stronger US data, and given renewed jitters in Eurozone sovereign bond markets.

EUR

A German government spokesperson confirmed that ECB Governing Council member Weber intends to step down on April 30 as President of the Bundesbank, and that his successor will be named this week. The President of the Bundesbank has a seat on the Governing Council of the ECB.

A delegation of EU, IMF, and ECB inspectors to Greece approved the latest tranche of financial aid amounting to ?15bn. The head of the IMF's mission to Greece, Thomsen, said that the austerity program is "on track but it will not remain on track without a significant, broad-based acceleration of reforms". The EU's representative, Deroose, said that the prospects for Greece returning to bond markets in 2011 are "rather bleak".

JPY

Japan's Q4 GDP contracted by less than expected, declining by -0.3% q/q (cons. -0.5%). It marks the first quarterly contraction since Q3 2009.

GBP

Attention will focus squarely on inflation data this week, with January's CPI report due on Tuesday, followed by the quarterly inflation report and subsequent press conference on Wednesday. Friday's stronger than expected PPI numbers for January suggest that inflationary pressures continue to build, and our UK economist is with the consensus looking for CPI to come in at +4.0% y/y.

AUD

Australian home loan lending increased by +2.1% m/m in December, ahead of consensus expectations of only a +1.0% m/m increase.

CAD

The CAD received a boost after December's trade balance unexpectedly registered the biggest surplus since October 2008. Exports by volume rose +9.7% m/m, suggesting that Canadian exporters are learning to cope with the stronger CAD, which somewhat erodes an obstacle to further rate hikes from the Bank of Canada.

A. M. Negrin Bautista, CFA

Chief Analyst at Fibosignals.com

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