Stressed Euro, Slow China, and Growing U.S cause FX problems

Market focus on consumer sector

NFP breaks multi-barriers

Strong buck heaps pressure on metals

Market’s weary of SNB’s Jordan

This week is expected to be light on the U.S indicator front, but notable consumer sector numbers will be announced. After last Friday’s better-than-expected employment report, traders will be looking to see if the consumer sector gains in other aspects.

Will Tomorrow’s JOLTS (job opening’s) report continue the strong payroll trend? On the last go around, retail sales fell in December, supported by lower gas prices and a very volatile auto sales sector. Analysts are suggesting that the market could see more of the same, but with the underlying trend still relatively healthy. To date, U.S consumer mood have been relatively strong and Friday’s University of Michigan consumer sentiment will close out the week.

NFP broke all barriers

Stronger job data in North America, and especially in the U.S produced much higher growth in jobs than market participants had been expecting and perhaps more importantly, a rise in wages. This news was enough to support the ‘mighty’ USD to push on to new heights and ranges. Excluding the JOLTS report discussed above, other reports that will come out include: U.S. retail sales, China’s CPI, EU GDP, U.S. jobless claims, BoE inflation letter, consumer sentiment, G20 Summit, Euro group meetings, GB manufacturing production, and French industrial production. No central Banks, but enough data to keep market participants weaving.

Greenback puts the pressure on precious metals

The “blockbuster” jobs report heightened expectations that Ms. Yellen and company at the Fed will have the confidence to hike interest rates this year, and this despite other major economies continuing to struggle with their own weakening nations. Lat Friday saw a massive jump in US short-term rates after the headline job print, while U.S benchmark 10’s backed up a massive +30bps, to just under +2%. Higher U.S yields will always make the dollar very appealing. The USD gathered momentum closing out the week, and now starts on the front foot so far this week. The inverse relationship for precious metals to the U.S Dollar and rates continues to hold true – precious metals are sliding lower as U.S rates rally higher.

Central Banks again amongst the mix

Europe spent much of last week again stunned by the Greek crisis and distracted by diplomatic maneuvering surrounding the Ukraine conflict. As the Greek government began talking details of a new financial plan with European officials, the ECB cut Athens off from its cheapest available funding for its struggling banks. Nevertheless, the possibility of a Greece exit risks rise as the New Greek PM Tsipras continues to harden his election pledges to “roll back austerity and reject any bailout program extension.” It’s not too much of a surprise to expect the forex market to want to begin this week on more of a cautious note, as global ‘events risks’ again appear to be building – from Greece to China.

Mind you the ECB is not playing it easy either. EU partners are demanding that Greece stick to its prior agreements through an extension of the current bailout program. The ECB sent clear signal last week by refusing to accept any more Greek government bonds as collateral for loans, forcing Athens to use the ELA facility for short-term liquidity (at a cost of +1.5% compared to +0.005% for the repo facility.) The decision effectively grants the ECB the ability to turn off the country’s funding on short notice and increases the pressure on the Greeks to cut a deal before the Feb 28th deadline when the current program expires.

Investors will pay close attention to the upcoming meeting of the Group of 20 finance ministers today, and the Eurozone finance ministers. The latter will hold an extraordinary meeting in Brussels Wednesday to map out a solution to the debt standoff with Greece’s new anti-austerity government before the country’s bailout expires at the end of the month. The meeting is a day before a full EU summit.

Market gun shy of SNB’s Jordan

After Swiss policy makers dropped the EUR/CHF floor a number of weeks ago (€1.2000) there is great “uncertainty and lack of confidence” over their policy stance. SNB’s Jordan indicated over the weekend “a willingness to remain active in forex as well as take interest rates into negative territory. Ultimately, the success of the SNB’s actions will be judged by from how this stands up as opposed to a number of months of intervention data.

Chinese components deteriorate

Trade data from China trade saw exports and imports weakening sharply. China’s January trade balance hit a record high surplus (+$60.0b vs. $48.9be) as components deteriorate (Exports Y/Y: -3.3% vs. +5.9%e; Imports Y/Y: -19.9% vs. -3.2%e) – there is a natural risk of the CNY currency to depreciate.

Last week, the PBoC delivered its first Reserve Requirement Ratio cut in three-years after China’s January manufacturing PMI contracted for the first time in two-years and non-manufacturing PMI hit a one-year low. Softer data from the world’s largest economy is beginning to worry more of the market.