EUR/USD: Long In Good Shape

Do you want to know which are the Current Trading Positions of our contributors? Get a glance here.

EUR/USD: Long In Good Shape

• Chicago Fed President Charles Evans said a "very shallow" series of interest rate hikes over the next few years is appropriate to buffer the US economy from outside shocks and the risk of inflation slipping too low. He added that the Federal Reserve should have more clarity by the end of the summer whether recent strength in US inflation data is a lasting reality or merely a temporary blip due to winter-related irregularities in the surveys.

• The ADP National Employment Report said US private employers added 200k jobs in March, above market expectations of 194k gain. Private payroll gains in the month earlier were revised down to 205k from an originally reported 214k increase. The ADP figures come ahead of the US Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. US nonfarm payrolls are expected to show the world's largest economy added 205k jobs in March, with the jobless rate steady at 4.9%. Average earnings, seen as signalling inflation trends, are expected to rise 0.2%.

• The EUR/USD broke above daily highs on March 18 and March 17 yesterday, which opens the way for stronger gain in the near term. The EUR/USD rose to a new 5-month high at 1.1384 today. The nearest resistance is a psychological barrier at 1.1400. We keep our bullish strategy unchanged, with the profit locked in at 1.1220.

GBP/JPY: Long At 161.00

• Support among Britons for staying in the European Union has increased slightly since last month giving the "In" campaign a narrow lead ahead of a June referendum. The ORB poll found 51% of voters wanted Britain to remain part of the 28-nation bloc with 49% wanting to leave. A similar ORB poll last month had 52% backing an EU exit and 48% supporting staying in the bloc.

• A telephone poll for Ipsos MORI on Tuesday showed the "In" campaign had an eight point lead over those wanting to leave, but that represented a sharp decline from the previous month. The survey showed 49% would vote to remain in the EU at the referendum, 5% less than in a similar poll in February. The poll said 41% of respondents would vote to leave, up from 36% last month. However, the polling firm said a change in methodology for the March survey had reduced the comparability with previous polls.

• British mortgage approvals fell last month for the first time since September but remained close to January's two-year high, Bank of England data showed today, suggesting Britain's housing market is still robust. Thursday's data showed net consumer lending rose by GBP 1.287 billion in February and that yoy growth was 9.3%, its highest since December 2005. Net mortgage lending, which lags approvals, rose GBP 3.648 billion in February, the BoE said, while total lending to households was up GBP 4.935 billion, giving an annual growth rate of 3.7%, the fastest since November 2008.

• The Office for National Statistics said that the deficit in the current account widened to GBP 32.7 billion in the fourth quarter of 2015, shooting up to the equivalent to 7.0% of GDP. The deficit had stood at 4.3% of GDP in the third quarter. Britain's current account deficit reflects not only the shortfall in its trade balance but also the higher outflows of dividends, bond payments and other returns to investors outside the countries compared with inflows the other way.

• The Office for National Statistics said that Britain's economy grew 0.6% in the fourth quarter compared with the previous three months, higher than its previous estimate of 0.5%, thanks mostly to stronger growth in the services sector. GDP was 2.1% bigger than in the fourth quarter of 2014, stronger growth than the previous estimate of 1.9%. Consumer demand remains the main driver of growth and Thursday's data showed spending by households grew by 0.6% in the fourth quarter, unchanged from the previous three months.

• Bank of England governor Mark Carney warned that the challenges global policymakers face in a low nominal-growth environment cannot be solved by monetary policy alone. He said the biggest vulnerability the global economy faces is its low nominal growth and low-interest rate environment that creates great challenges for companies, sovereigns, bank profitability and policymakers. He warned that if a low nominal-growth environment persists for years, it could undo some of the efforts made by policymakers and banks in rebuilding a sustaining and resilient financial system.

• Bank of Japan Governor Haruhiko Kuroda said it was not apparent from market moves that investors are worried that the central bank may be financing government spending with its debt purchases for quantitative easing. He added there were no limits or obstacles to the monetary policy the central bank was employing to meet its 2% inflation target. He said the BOJ will continue with quantitative easing and negative interest rates as long as needed to achieve price stability.

• After a long pause we have opened the GBP/JPY position again. We went long at 161.00. The GBP-pairs have been very volatile recently and that is why we find this position quite risky. Investors worry that leaving the EU would hurt growth and threaten the huge foreign investment flows Britain needs to fund its widening current account deficit. On the other hand, falling concerns over the Brexit and rising oil prices should support the GBP. The JPY remains a popular funding currency in carry trade because of dovish monetary policy of the Bank of Japan. The Bank of England is very likely to tighten its policy much earlier than the BOJ and probably earlier than it is currently expected by the market.

• If current short-term GBP/JPY bullish trend maintains, we will consider opening long-term position.