Market Drivers for February 25, 2014

UK Mortgage approvals are higher

Cable boosted by possible Vodaphone flow

Nikkei 1.44% Europe -0.37%

Oil $102/bbl

Gold $1335/oz.

Europe and Asia:

EUR GE GDP 0.4% vs. 0.4%

UK BBA Mortgage Approvals 50K vs. 47K

UK CBI Realized Sales

North America:

CAD Corporate Profits 8:30 AM

USD CB Consumer Confidence 10:00 AM

Its been an extremely quiet night of trade in the currency market with majors hugging very tight ranges and eco calendar essentially barren of any meaningful data. The EUR/USD has been trapped on either side of the 1.3750 barrier as the 1.3770 level continues to cap all rallies while 1.3700 remains support.

In overnight news the German GDP came in at 0.4% as expected but Italian Retail Sales missed printing at -0.3% versus 0.4% eyed. Although euro has remained elevated primarily on the shoulders of relatively robust German data, the eco news from the periphery continues to disappoint and this dichotomy between properly performing German economy and sputtering periphery cannot last forever.

Unless growth in the rest of the EZ begins to pick up, the pressure on ECB to provide further stimulus is likely to ratchet higher and next week’s ECB meeting now looms large as a possible date for a policy shift given the lackluster conditions for growth in the region.

Meanwhile in UK cable was the only major to show some strength as the pair climbed to 1.6700 in morning London dealing. There was little fresh economic news to support the move, although the BBA mortgage approvals figure did climb to 50K from 47K eyed as the housing market clearly remains hot. However, the pop higher was driven by speculation of additional M&A flows from the Vodaphone deal. On Friday cable plunged when rumors spread that most of the deal was hedged with options but today’s action suggests that there may be some residual clearing demand left for cable and the unit has been strong on the crosses rising more than 100 points against all the comm dollars and up about a 25 points versus the euro.

There is no meaningful UK economic data until tomorrow, when the 2nd revision of the GDP will be released. The market anticipates no change from the 0.7% reading but any upwards surprise could spark fresh demand for the unit and sent it to a retest of recent highs at 1.6800.

In North America the calendar remains quite as well with only HPI data and Consumer sentiment due at 1500 GMT. FX is likely to take its cue from equities, although even here the correlation has been tempered markedly over the past few days. Yesterday’s rise in equities saw very little follow through in USD/JPY and today’s action in currencies may be similarly muted as traders await new macro data for further directional cues in the market.

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