European Summary and Highlights 20 Feb
The USD was generally weaker through the European morning session.
European morning session
The USD was generally weaker through the European morning session. EUR/USD gained around 35 pips to trade above 1.08, and we saw similar gains in the other risky currencies. The JPY and CHF also gained against the USD, but less substantially, with EUR/CHF and EUR/JPY up around 0.2%.
EUR/GBP also gained around 10 pips through the morning, although it was little affected by the BoE testimony to the Treasury Select Committee. Governor Bailey struck a positive tone in saying he saw signs of an economic upturn, and deputy governor Broadbent said interest rate cuts during 2024 were possible but the timing was dependent on an unclear outlook for inflation.
There was no market moving data, but the Swiss trade surplus for January and the Eurozone current account surplus for December were both larger than expected.
Asia session
The People’s Bank of China cut its 5-year Loan Prime Rate by 25bp to 3.95% from 4.20%. It was one of the largest cuts ever seen but its impact for the market seems to be muted as we are seeing regional equity indexes remaining in the red with individual ones up a few pips. The market seems to think the cut is coming too late and has been speculating from more, stronger stimulus from the Chinese government. The RBA minutes do not give us anything new for they continue to keep doors open as long as inflation and domestic demand remain strong. That is the caveat of changes in the wordings of February's forward guidance which can be interpreted as no more hike unless CPI spikes. The AUD/USD did not cheer the PBoC rate cut for Yuan is also giving the cold shoulder. AUD/USD is down 0.14% to 0.6531, NZD/USD lose by a same magnitude to trade at 0.6140 while USD/CAD rose 0.14%.
It is another day USD/JPY stays above 150 on broad USD strength and we have the usual Suzuki's jawbone intervention. U.S. Treasury Yields are performing individually while 10yr JGB yields slip. From now till March's spring wage negotiation, there seems to be limited data that would significantly sway the position of JPY, unless there are "leaks" from BoJ. Thus, USD/JPY seems to be driven by USD flows. USD/JPY is trading 0.14% higher at 150.32 and still looks to be consolidating within 149.24 and 150.89 from last Tuesday's gain. Else, EUR/USD is down 0.07% and GBP/USD is down 0.08%.