Good morning

High Low High Low
EUR/USD 1.1085 1.1026 USD/ZAR 11.8390 11.7755
GBP/USD 1.5269 1.5224 GBP/ZAR 18.08 17.95
EUR/GBP 0.7263 0.7239 USD/RUB 62.20 61.50
USD/JPY 119.91 119.62 USD/NGN 200.5 199.5
GBP/CHF 1.4764 1.4696 S&P 500 2,101 2,095
USD/ILS 4.0105 3.9800 Oil (Brent) 60.77 60.25

There is a wonderful phrase I would like to open today’s blog with: ” You can’t keep a good man (USD) down”. Other than profit taking and surprising US data, I just cannot think of any other decent reason that will bring a (temporary) halt to the USD rally. EURUSD  suffered further losses (starting yesterday and continuing into today) hitting a fresh 11+ year low following a morning of weaker than expected EU services data and decent numbers from the US which brought out the USD buyers in force. Not to be forgotten, GBP also suffered losses against the USD  but rallied vs the EUR. Today see’s the interest rate decision by the ECB and Gov. Draghi in the following conference will reveal the ECB’s plan to execute its €1 trillion QE programme. Questions and (apparent) answer on the how and when the QE programme will be set out has left the EUR in tatters. While the programme is due to carry on until late 2016, we are of the opinion that this could last longer if the ECB plan to raise inflation back to the 2% target….wishful thinking for now . No doubt the ECB will have to adjust (lower) its inflation and growth forecasts for 2015 (0.7% and 1% resp.). A marked change to the forecast  will influence EURUSD with a downward adjustment to inflation and growth adding to the pressure on the EUR. Either way the EUR’s downward trend looks intact and further weakness for EURUSD looks set to continue, not to mention the publication of the NFP number tomorrow (adding more pressure to the EUR). The one thing that stands out is the complete SILENCE from the FED/ECB about the strength/weakness in the USD/EUR. No doubt the EU/ECB are delighted to see the EUR weakening as it makes European goods more attractive (cheaper) for foreigners and exporters alike. PARITYFX continues to call for EURUSD PARITY in Q3 2015, ahead of the expectations by the banks. We were right about the EUR falling from 1.3750 (July 2014) to 1.2000 (31 Dec 2014), so we are now making another bold call.

With “GREXIT” off the table I guess the only thing that could change the USD’s sentiments today is if Gov. Draghi RAISES growth and inflation forecasts. Anything is possible of course but by doing so he will be adding unnecessary pressure on the EURO (zone). Failure to reach these forecasts will be viewed quite negatively and in all likelihood see the EUR torn to pieces.

Other key developments yesterday:

(1) Bank Of Canada left rates unchanged as expected.

(2) Aussie retail sales came in at +0.40% as expected

(3) China cut its 2015 growth target to about 7% and its 2015 inflation target to 3%, as expected.

(4) USDILS remains weak trading again through NIS 4.00, currently just under. Pressure will remain on the currency in line with the recent rhetoric by the BOI.

(5) precious metals in general on the sidelines with Gold and Silver pretty much unchanged over the past few weeks. Obviously all eyes on currencies, QE and interest rates for the moment. Inflation is a known factor now so hard to use that as a reason to test the metals price resolve.



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