Forex Investment and Currency Trading

With the European data calendar relatively empty, EUR/USD did not experience much movement in the European morning. On the other hand, GBP came under pressure as the market focused on the de facto nationalization of a British banking entity over the weekend. However, with EUR likely to face a larger loss of yield support in the weeks ahead and the two-year EZ-UK swap spread still coming down, some analysts favor EUR/GBP downside and would expect the trend-line to hold.

A short-term rebound in Central Europe’s FX on Monday morning, helped by tougher talk on the part of the central banks. This market development is viewed as a temporary rebound and do not expect a turnaround toward sustained strength. On this basis, this may provide an attractive opportunity to re-establish short positions. The central bank in Hungary announced that the Board had met twice over the weekend, and that it was ready to defend the forint, including through the use of its entire monetary policy tools. The NBH also announced that it will start channeling EU funds to the market. This is so far the strongest move by Hungary, short of a possible rate hike, and that is why the HUF is rebounding from its lows. In Poland, there was also more verbal intervention on Monday moring, with the governor stating that FX intervention was a policy option, although the governor also reiterated a dovish bias for monetary policy.

In the Americas, the data calendar is largely empty on Monday. But important data will be on tap towards the end of the week, with US Retail Sales on Thursday and the Canadian Labour Force Survey on Friday.

In Latin America, the focus will be on central banks, with Brazil’s Copom decision on Wednesday where market consensus go for a 100bp cut, and Chile’s central bank decision on Thursday where market expects a 175bp cut. Other key data this week will include Mexico’s CPI on Monday; Brazil’s GDP on Tuesday; Brazil’s IPCA inflation on Wednesday, and Brazil’s retail sales on Friday.

In Asia, China’s CPI and PPI data will be keenly watched and market is expecting yoy contraction on both prints. Elsewhere, Japan’s core machinery orders might have begun stabilizing albeit at a very low level. Also expect business confidence erosion to be reflected in the business survey in Australia.

In Europe, on Tuesday, France, Norway, and the UK will all release industrial production readings for February and further deterioration is expected. The additional declines in the cyclical indicators should continue to point towards further monetary easing for all three countries.

In EMEA, the focus this week will be on Turkey’s current account on Tuesday, Hungary’s CPI on Wednesday, South Africa’s manufacturing production on Thursday, and Poland’s CPI on Friday.