China sparks fresh risk aversion

<p>The Asian session has been relatively quiet due to the national holidays in New Zealand and the forthcoming Martin Luther King Day in the US. […]</p>

The Asian session has been relatively quiet due to the national holidays in New Zealand and the forthcoming Martin Luther King Day in the US.

The demise of the Shanghai composite had led to a slightly weaker tone for the dollar as cross JPY pairs come under renewed pressure, following reports that a number of Chinese brokerage houses were suspended from opening new accounts for three months. This was due to violations of financing repayments, as the CNH falls some 200 points against the dollar.

The head of the Swiss finance department has announced plans to launch measures to help Swiss companies left exposed by the CHF surge, as many market commentators suggest that the SNB have been surprised by the magnitude of the CHF appreciation.

As options grow increasingly limited in the SNB’s fight to contain the threat of deflation, president Jordan has warned of “opportunistic interventions” to stabilise the CHF market, adding that the cap was no longer justified with the improving Swiss economy.

The ECB meeting on Thursday is the highlight of the week, with market consensus expecting that the ECB will announce quantitative easing. German media reports suggest that Mario Draghi presented the ECB QE plans to German Chancellor Angela Merkel and Finance Minister  Wolfgang Schäuble last week, in an attempt to gain cooperation between fiscal and monetary authorities.

The program is likely to be set to at least €500bn of sovereign bond purchases in 2015, in proportion to each country’s paid capital at the ECB. Anything less than this, and the market will be disappointed – although numbers closer to €800bn have been suggested last week by ECB sources.

Together with other measures, including the ABS and TLTROs programs, this should see the ECB’s euro balance sheet hit the three trillion mark. The ECB is also likely to hold back on some details ahead of the Greek election this coming Sunday, such as the sharing of credit risk for sub-investment grade bonds.



Supports  1.1500-1.1450-1.1550  | Resistance  1.1850-1.1910-1.1980




Supports  116.80-116.30-115.85  Resistance  118.20-119.30-120.80




Supports  1.5120-1.5075-1.5000 Resistance  1.5160-1.5235-1.5310



Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.