Morning Briefing : Euro reflecting policy speculation, USD still  in support as sequester kicks in

What’s new:
Asia: Equities mostly lower; Japanese Nikkei defies the only exception
China: Softer Chinese non-manufacturing PMI drags sentiment lower
FOREX: Yen finds support

Overnight rates and Indices:
EUR/USD    1.2987    1.3031    -0.13 %
USD/CHF    0.9417    0.9455    -0.02 %
GBP/USD    1.5018    1.5049    0.03 %
USD/JPY    93.29    93.73    0.03 %
EUR/CHF    1.2258    1.22775    0.11 %
EUR/JPY    121.26    121.99    0.16 %
Dow Jones    13937.60    14107.09    0.25 %
Nasdaq    2713.49    2751.22    0.33 %
S&P 500    1501.48    1519.99    0.23 %
Nikkei 225    11613.59    11767.68    0.39 %
Shanghai    2259.25    2333.54    -3.64 %
Gold spot    1574.64    1584.98    0.02 %
Crude Oil    90.17    90.89    -0.52 %

Comments:
Taking a generic view of risk sentiment earlier in today’s session we see that Asian markets were mostly dominated by Chinese data coming out. Chinese Non-Manufacturing PMI for February came out at 54.5, still in growth mode, but softer than the previous month’s reading of 56.2. Asian markets were mostly lower with the Japanese Nikkei being the only exception. Friday’s US close was mostly positive as investors took the cue from some stronger than expected US data.

Japan was higher on hopes for more aggressive monetary easing raised by the new BoJ governor. Despite this in the forex market the USD/JPY opened slightly lower as the JPY managed to garner fresh support.  The currency pair is currently trading at the price of 93.45.

Taking the broader picture the USD/JPY is facing some significant resistance in the 93.40/93.50 region after rising to 94.46 on the 11th February; the USD/JPY was unable to find the necessary momentum to attempt higher levels.

The Yen rises across the board this morning as concerns over the EZ and the US, favored demand for safe haven assets. On the other hand speculation of further rate cuts from the RBA tomorrow and softer services PMI from China dragged the Aussie lower.

The EUR/USD has kept within a 1.2987-1.3031 range this morning as the currency pair looks back at the downtrend experienced throughout the month of February -where the euro lost 3.8% to the buck.The US dollar continues to find strength as the US president officially triggered the automatic spending cuts, also known as the Sequester.

Despite this, the EUR/USD drop lower was more the result of euro weakness as investors had to deal with the results of the recent Italian elections. With the outcome of the ECB policy meeting due later this week speculators may be reflecting probabilities of more stimulus out of the ECB.

Ahead today we have a relatively quiet economic docket as investors gear up for some important data later this week. Amongst the data of most relevance we have policy rate decisions from EZ, UK, Australia and Canada and we also have Payrolls data from the US.


Good Day.

Rudolf Muscat - senior Trader - RTFX Ltd