Week in FX Europe May 6-11

Following the Greek and French elections last weekend, the mighty buck has found itself in firmer territory against the single unit and the crosses. Investors happen to appear more bullish on JPY and GBP and most bearish on the antipodean currencies. The overall market bearish view looks like supporting the traditional low-yielding safe heaven currencies. This is certainly being backed by the negative April surprises on Euro area growth data. The bears conundrum is why has the single unit held up so well in Q1 and so far in Q2? In truth, despite the sizable LTRO program, looking at the spread differentials they have not moved that significantly against the EUR. The market will obviously expect an easing bias from the ECB to address the weaking of the Euro macro economy to eventually provide that needed pressure to weigh on the currency.

Below are some other highlights of the week:


  • EU: Last weekend’s political news in Europe saw the market initiate a general weakening in risk-sensitive currencies.
  • EU: Sunday’s parliamentary elections in Greece have resulted in a fractured parliament with a strong anti-bailout element. The two main parties, PASOK and New Democracy, which have supported the bailout, obtained only one-third of the votes cast, and no single party gathered more than 20%.
  • EU: The results in Greece have clearly raised the level of uncertainty in Europe’s periphery.
  • FRF: Hollande, a socialist and anti-austerity believer, is France’s new President, beating Sarkozy in a run off.
  • GER: German factory orders rose +2.2% vs. a +0.5% consensus. Digging deeper, domestic orders recovered by +1.3%, m/m, in March after a +0.8% fall in February. Meanwhile, foreign orders posted a strong +3.0%, rise driven by non-euro orders, up +4.8%. However, orders from the euro-zone remained flat after a +3.3% fall in February.
  • CHF: Swiss inflation rose +0.1%, m/m, and -1.0%, y/y, in April after a +0.6% rise in March, a touch weaker than the consensus forecast for +0.2% jump. Higher prices for clothes and shoes (+3.0%) were the main inflationary contributors. Without any new deflationary shock, the market expects the SNB to keep the 1.20 floor unchanged over the near term.
  • GR: Coalition negotiations are ongoing in Greece. Market remains concerned about Greek aid disbursements. Is there momentum building for a Greek effort to exit the EMU?
  • GER: Germany’s industrial production was much stronger in March, gaining +2.8%, m/m, above consensus for +0.8%. February’s print was also revised higher to -0.3% from -1.3%. Analyst’s note that this would suggest that growth momentum has been somewhat stronger than previously thought.
  • UK: The RICS UK house-price index fell to -19 in April from a downwardly revised-11 in the previous month.
  • ESP: The Spanish government announced that they will require its banks to set aside between +EUR20b and +EUR40b in additional provisions as part as an effort to overhaul the country’s financial woes.
  • EU: Since the Greek election results, FX price action has reflected the general risk-off trend, with the big dollar remaining well supported across the board and euro-sensitive risk proxies such as ZAR, HUF, TRY and PLN one of the worst performers on the week.
  • Gr: The Greek anti-austerity rhetoric appears to be intensifying. This would suggest that the possibility of another general election taking place next month has got stronger, while the prospects of Greece ever exiting the EU just got that bit more likely.
  • PLN: The Polish central bank surprisingly raised their policy rate by +25bps to +4.75% this week. Policy makers delivered on its earlier more hawkish language despite weakening domestic data and worrying developments in the Euro-zone.
  • GBP: British retail sales posted their biggest fall in more than a year last month as BRC sales plummeted -3.3%, y/y, last month, following a +1.3% rise in the previous one. Seasonal weather is partially to blame for the poor showing.
  • EU: The Euro IP numbers were mostly better than expected. In France, manufacturing production rose +1.4%, m/m, better than the -0.2% estimate. In Italy, IP rose +0.5%, a better print than the +0.1% expected. Analysts tend to refer to these releases as “stale” data.
  • Gr: In Greece, the leader of the anti-bailout Syriza party surrendered his mandate, passing the mantle over to the PASOK party. Risks of a new election remain elevated as a coalition party formation seems unlikely.
  • SEK: Swedish industrial production rose only +0.4%, m/m, in March and failed to reverse the -5.1% drop in the previous month. Weaker Euro PMI’s suggest a difficult growth outlook. Coupled with moderating inflation has FI traders increasing the price for further Riksbank easing.
  • NOK: Norway’s inflation surprised much weaker than expected. The headline inflation fell to +0.3%, y/y, from +0.8% and has moved in line with the Norges Bank’s projections. The CBank kept rates on hold this week at +1.5%.
  • GBP: UK IP fell -0.3%, m/m. The weakness was driven by mining and energy sectors. Analysts note that the results are unlikely to cause revisions to Q1 GDP and should have little affect on BoE policy, which was left unchanged this week at +0.5%.
  • PHP: Exports fell -1.2%, y/y, in March, weaker than the consensus forecast for a +10.1% gain.
  • GR: Week is ending on news that leaders of Greek New Democracy and PASOK parties are seeking a coalition arrangement with minority pro-euro left wing party Democratic Left. However, the market is leaning towards a second round of elections being the most likely outcome, with negative implications for the EUR.
  • EU: The EU Commission’s new set of forecasts single out Spain with the largest slippage against deficit targets. Spanish budget deficit is expected to reach +6.4% of GDP this year and +6.3% next.
  • GBP: UK construction output fell -4.8% in Q1 and finally, the UK Nationwide consumer confidence index fell to 44 in April from 53.



ASIA Week in FX



  • Retail Sales data is released in NZD and USD
  • Monetary Policy minutes and rhetoric comes from AUD, GBP and USD
  • EUR, CAD and USD presents inflation reports
  • Claims data is produced by GBP and USD
  • Growth numbers come from JPY
  • EUR has its economic sentiment, USD finishes with Philly Fed Manufacturing


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell