By Dhilshan Sandanarajah
Markets were fairly quiet yesterday during the day, as traders awaited the result of the Eurogroup meeting last night. Traders speculated a successful agreement between Greece and Europe as there were signs that a bridge loan had been agreed upon. EUR/USD soared to just below the 1.135 handle, however was premature to the actual result. Eurogroup insisted that talks would continue on Monday, as a suitable agreement had not yet been reached. EUR/USD rapidly plummeted back to around the 1.13 mark and now trades just above this handle.
EUR/USD looks unlikely to find any direction till a suitable agreement has been reached with Greece and Europe, as we have seen the currency pair sit in the same region for the past few days.
USD/JPY was able to make some extended gains yesterday breaking above the 120 mark after U.S equities outperformed at the open. This was a surprise to traders as oil continued to plummet, with WTI reaching lows of 48 yesterday. The continued speculation of China adopting a bond buying program after continued fall in growth and signs that Japan’s monetary stimulus is not going to stop anytime soon, has added to the weak the yen currency. Both EUR/JPY and GBP/JPY extended their gains yesterday, reaching highs of 136.7 and 184 respectively.
Today began with German HICP, which once again has been negative, however the EUR/USD pair has made little attempt to move below the 1.13 handle, as it has found no direction as of yet.
Today’s focus though will be the BOE inflation report in the late morning, as Mark Carney will attempt to settle fears of deflation. The last significant BOE report predicted inflation would undershoot 1%, as traders saw the likelihood of a delayed rate hike. Today’s inflation report may give a better idea of whether inflation looks to make a turn, though oil prices continue to fall, Carney is likely to focus on the positive effect of increasing wage inflation. GBP/USD is currently trading around 1.524 and the inflation report is likely to give the currency pair some direction, with a reassuring Carney speech likely to see the currency pair break above the 1.53 level.
Later will see the release of U.S monthly retail sales, predicted at negative 0.5%, after being disappointing last month at negative 0.9% a slight bounce is expected. With Fed members such as Fisher wanting a rate hike sooner than later, with his focus being the rising employment in the U.S. He is unlikely to gain any support if retail sales continue to fall, and fears will start to arise about whether falling inflation is just due to a fall in oil prices, but rather a fall in domestic consumption.
That’s the wrap for today, Good Luck with your trading endeavours.