Risk Off Flows Subside in Europe – All Eyes on New York

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Market Drivers February 9, 2018
European equities stabilize USDJPY above 109.00
CAD Employment on tap
Nikkei -2.32% Dax -0.25%
Oil $61/bbl
Gold $1315/oz.
Bitcoin $8300

Europe and Asia:
GBP UK IP 0.0% vs. 0.3% MP 1.4% vs. 1.2%
GBP Trade Balance -12.45B vs. -12.23B

North America:
CAD Employment 8:30

Risk off flows subsided in late Asia and early Europe today as equities subsidized and helped lift yen and swiss pairs throughout the early morning London trade. USDJPY recovered the 109.00 figure and EURJPY traded back to 134.00 as short covering and relief flows were the dominant move of the night.

Whether the rally can sustain itself will depend on the price action in US equity markets today which were rattled by another 1000 point drop in the Dow yesterday. In Washington, DC lawmakers are working furiously on a budget deal and any positive action on that front could help stocks stabilize. Still the day can be fraught with peril today especially if selling accelerates in the afternoon and causes panicked liquidation ahead of the weekend.

On the economic front, the only data on the docket was from UK and it proved disappointing once again. UK Industrial Production printed at 0.0% versus 0,.3% eyed, while UK Trade deficit ballooned to -13.5B versus -11.5B expected.driven mostly by an imbalance in fuel imports. Meanwhile, Industrial Production suffered from some closures in the mining and quarrying sector.

Overall the data from UK was only mildly negative, but it continues to show a clear pattern of the slowdown in UK economic activity since the start of the year. If this trend continues it will stand in sharp contrast to BoE decidedly hawkish slat yesterday and may force the MPC to reconsider tightening by May. Cable traders were understandably nervous and pushed the pair back towards the 1.3900 figure by mid-morning London trade.

Aside from the ever-present focus on equity market flows the only event of significance in North American session today is the Canadian employment data, The market is looking for a steep dropoff from the heady gains of 76K the month prior. Typically Canadian employment data is pretty cyclical on a month over month basis, but for the past three months it has been impressively robust. Therefore, today even if the data shows a smaller gain than the month prior, if the number beats the 10K market forecast, the loonie could bounce, especially so because USDCAD appears to have run into stiff resistance at the 1.2600 figure.

Boris Schlossberg
Managing Director

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