With little news overnight, what moves we saw could be attributed to pre-FOMC positioning. But let’s not forget the New York markets are bracing for winter storm Stella which is anticipated to dump anywhere between 15-20 inches as it blasts up the east coast, stranding thousands of travellers, including German Chancellor Merkel, whose meeting with President Trump has been rescheduled to March 17. Markets are in a holding pattern overnight ahead of the heavy docket of Macro events later this week (i.e., Fed/BoJ /BoE /Dutch elections).
The Australian dollar was full of vim after the downward momentum started to fade late last week. And while the US payrolls failed to live up to the market’s lofty expectations, there was a modest retracement higher on sagging USD appetite. However, I suspect the move was assisted by the EURAUD coming back to earth as the market weights it’s overall Euro risk appetite. US equities moved slightly higher led by an outperformance in metal and mining stocks after the underlying commodities had a good rally yesterday. Meanwhile, all eyes will be on the China Data dump, as the markets expect industrial production, fixed-asset investment and retail sales to have risen by 6.2%, 8.3%, and 10.6% respectively.
On the domestic front, Australia February NAB confidence has come slightly lower at seven versus ten prior. The business conditions are also more moderate at nine versus 16 prior. AUDUSD momentum has sagged but has held the critical .7550 level ahead of the Chinese Data
A minor inflexion point as traders mull over the prospects of their latest sweetheart trade, EUR and JPY crosses, to power on as price action through this full slate of Central Bank events will clearly indicate if we’re at the nub of a trend or will the market fall back to USD exclusive mode again. Not lots of information overnight, but one senses some friction amongst the ECB sitting hawks and doves. The doves carried the tone in the statement, but Draghi’s press conference was a touch on the hawkish side. How much the euro trade remains in vogue will be dictated by just how hawkish the Fed will tilt later in the week. On the flip side, one has to wonder why the euro vols are looking too cheap for potential risk events that could be as large as Brexit, we know Le Pen is behind in the polls, but given recent history, it might too soon to count out the “ silent majority.”
Positioning will dominate USDJPY pre -FOMC as the markets ping pong back and forth tracking the session high and low on the US 10 year treasuries.