Europe Open: USD/CNY drops to its lowest in more than two years - 27 February, 2015

Market Roundup

• China's yuan fell to the lowest level against the dollar in more than two years on Friday.
  
  
• BoJ Gov Kuroda: BoJ will not respond to oil prices themselves but will monitor how they affect inflation expectations; BoJ was able to prevent delay in eliminating deflationary mindset with its Oct easing; fornow, don't see any excess risk taking moves emerging from our stimulus program.
  
  
• Japan Jan industrial output +4.0% m/m, +2.7% consensus, Feb consensus at +0.2%, previous forecast -1.8%, -3.2% consensus in March.
  
  
• Japan Jan core CPI +2.2% y/y, Tokyo Feb core +2.2%, +2.3% and +2.2% consensus.
  
  
• Japan Jan retail sales -2.0% y/y, -1.3% consensus.
  
  
• Japan Jan household spending -0.3% m/m, -5.1% y/y, +0.4% and -4.1% consensus.
  
  
• Japan Jan unemployment 3.6%, jobs applicants' ratio 1.14, 3.4% and 1.15 consensus.
  
  
• Foreign CB US debt holdings -$1.955 bln to $3.286 trln Feb 25 week, Treasury holdings +$753 mln to $2.939 trln, agencies -$3.022 bln to $282.905 bln.
  
  
• UK Feb GfK consumer confidence index +1, unchanged m/m, +2 consensus.
  
  
• Australia Jan private-sector credit +0.5% m/m, as consensus, housing credit +0.6%.
  
  
• New Zealand Feb ANZ biz confidence index 34.4%, own activity 40.9%, Jan 30.4, 37.3.
  
  
• New Zealand Jan new dwelling consents -3.8% m/m, still +3.6% y/y, Dec rev -2.3% m/m.

Economic Data Ahead

• (0000 ET/0500 GMT) Japan Jan housing starts, -11.3% y/y consensus; previous -14.7%, const orders +7.5%.
  
  
• (0245 ET/0745 GMT) France Jan consumer spending, -0.5% m/m consensus; previous +1.5%.
  
  
• (0245 ET/0745 GMT) France Jan producer prices; previous -0.9% m/m.
  
  
• (0300 ET/0800 GMT) Spain Feb HICP flash, -1.3% y/y consensus; previous -1.5%.
  
  
• (0300 ET/0800 GMT) Switzerland Feb KOF indicator, 90.0 consensus; previous 97.0.
  
  
• (0330 ET/0830 GMT) Sweden Q4 GDP revised, +0.5% q/q, +1.5% y/y consensus; prelim +0.3%, +2.1%.
  
  
• (0330 ET/0830 GMT) Sweden Jan retail sales, +0.5% m/m, +3.8% y/y consensus; previous -0.6%, +3.4%.
  
  
• (0330 ET/0830 GMT) Sweden Jan PPI; previous -0.3% m/m, -0.1% y/y.
  
  
• (0400 ET/0900 GMT) Norway Jan retail sales ex-autos, unch consensus; previous +0.2%.
  
  
• (0400 ET/0900 GMT) Spain Dec current account balance; previous bln surplus.
  
  
• (0400 ET/0900 GMT) Norway Feb unemployment, 3.0% nsa, 88.5k sa consensus; previous 3.1%, 87.87k.
  
  
• (0500 ET/1000 GMT) Italy Feb CPI prelim, unch m/m, -0.5% y/y consensus; previous -0.4%, -0.6%.
  
  
• (0500 ET/1000 GMT) Italy Feb HICP prelim, -0.2% m/m, -0.3% y/y consensus; previous -2.5%, -0.5%.
  
  
• (0800 ET/1300 GMT) Germany Feb HICP prelim, +0.7% m/m, -0.4% y/y consensus; previous -1.3%, -0.5%.
  
  
• (0830 ET/1330 GMT) US Q4 GDP prelim, +2.1% consensus; previous +2.6%.
  
  
• (0830 ET/1330 GMT) US Q4 PCE/core PCE prelim, -0.5% and +1.1% consensus; previous -0.5%, +1.1%.
  
  
• (0830 ET/1330 GMT) US Q4 GDP deflator prelim, unch consensus; previous -0.1%.
  
  
• (0945 ET/1445 GMT) US Feb Chicago PMI, 58.0 consensus; previous 59.4.
  
  
• (1000 ET/1500 GMT) US Feb U.Mich sentiment index final, 94.0 consensus; previous 93.6.
  
  
• (1000 ET/1500 GMT) US Jan pending home sales, +2.0% m/m consensus; previous -3.7%.

Key Events Ahead

• N/A UK DMO GBP1/2/2 bln 1/3-6-month Treasury bill auctions.
  
  
• N/A FOMC Fischer, BoJ Nakaso, others at US Monetary Policy Forum in New York.
  
  
• (0200 ET/0700 GMT) French FinMin Sapin, ECB/Austria CB Nowotny meeting in Vienna.
  
  
• (0400 ET/0900 GMT) Norges Bank currency operations, previous NOK700 mln sales/month.
  
  
• (1300 ET/1800 GMT) EU Hill speech at SIFMA conference in New York.

FX Recap

EUR/USD plunged in the early New York session as US dollar was boosted by strong durable goods orders and core CPI figures. It lost around 100 pips and dropped to 1-month low of 1.1209. It is currently trading at 1.1211 levels. The pair is likely to find support at 1.1200 level and resistance at 1.1270 and then at 1.1355 levels.

USD/JPY was marginally lower on the day at 119.29, after hitting 119.51 on Thursday. It currently trades at 119.14 and is likely to find support at 118.70. On the topside, it faces strong resistance at 120, which it has been unable to break in the past few sessions.

AUD/USD continues trading in the red on Friday and currently trades around 0.7790, slightly lower than Thursday's close of 0.7798. It found support at 0.7786 and 0.7740. It hit a one-month high of 0.7914 on Thursday.

NZD/USD held steady at 0.7541 in the Asian session and continued its choppy trade seen in the past week. Pair's immediate resistance is seen at 0.7577 levels and above which it could be pushed to 0.7613 levels. On the flipside, support is seen at 0.7528 levels and then at 0.7500 levels.

USD/CNY: China's yuan hit its lowest level against the US counterpart in more than two years on Friday, raising speculation if the country will devalue its currency to ward off a sharper slowdown. Prior to market open, the PBOC set the midpoint rate at 6.1475 per dollar, 100 pips weaker than previous fix of 6.1379. The spot market opened at 6.2595 per dollar and was trading at 6.2698 near midday.