Cable Gets a Pulse, Big Day Ahead

The biggest movers so far in 2015 have been the pound to the downside and kiwi to the upside, we look at why and also break down the final trading day of the week along with the many events on the calendar. We issued 2 new trades with 2 charts ahead of Canada's jobs report tomorrow, which follows a disappointing November report. There are also 2 AUD trades ahead of tonight's Aussie retail sales (see below).

The story on Thursday was the large rallies in US and European stocks. There was a significant element of FOMO – fear of missing out – after slumps in Oct and December were wiped out in days. Economic data was a non-factor with initial jobless claims very close to expectations at 294K.

US dollar strength for the day peaked in European trading as the euro carved out a new cycle low at 1.1754. It later bounced to 1.1820 but it was a similar bounce in sterling that grabbed our attention. Cable is down more than 3% since the start of the year but is showing signs of life ahead of 1.5000.

Cable has declined for 5 consecutive days; the headlines behind the weakness were the manufacturing and services PMIs but both are still on expansionary territory. With new year flows dying down, cable could easily correct.

On the flipside, the kiwi was the top performer for the third day on Thursday. In a near-zero yielding world, the +3.5% yields in New Zealand are tantilizing. It's most interesting that NZD has been able to rally in risk-off and risk-on environments this week. It bodes well for the year ahead.

But in the day ahead, all the focus will be on data:

Aussie Nov retail sales are due at 0:30, expected +0.2% from +0.4%. 

Chinese CPI/PPI at 0130 GMT. The consensus is 1.5% y/y but a smaller number could benefit AUD on speculation about Chinese rate cuts or stimulus. The risk is that China accepts lower growth. The Chinese Securities News reports that some provinces are doing just that, as they plan to announce lower growth targets.

From there, German data on industrial production and trade is due, Swiss CPI, UK industrial production and then Canadian and US jobs reports. Headline risk is tantamount on all fronts and it will be Monday before the dust settles.