Asia walked in to find the dollar already weaker across the board following a seemingly dovish Bernanke and Moody’s announcement to place the US on negative watch. EURUSD had already pushed up to 1.42 with AUDUSD having popped above 1.08 to trigger stops in light liquidity.
Early trading was very jumpy, with NZD a key beneficiary as it released its 1st quarter GDP data. The data was better than expect at 0.8% qq (vs 0.3% exp) and NZD surged from 0.8400 to 0.8450 on the release, before legging again to print up to 0.8507. The whippy early markets saw a bias to sell USD against the CHF and EUR from model accounts, with EURUSD seesawing between 1.4205 and 1.4245.
As USD/Asia opened and triggered a few stops to the downside, it gave us the final lift for EURUSD as we tripped up through stops above 1.4250/60 in fast trading, with AUD back up above 1.0780. Gold had already tripped above the 1576 highs and carried on seeing demand in early Asia, pushing to 1590.20 at the highs before slumping. The market shrugged off the usual Noda comments on the strength of the currency and continues to lean on the USDJPY. Finally we chewed through resilient bids around 78.60 and then in what looked like a stop fuelled flurry of activity was squeezed down to 78.45 to dip just below the lows made in the sharp sell off on Tuesday night.
Things slowed and we pulled off the highs, with equity futures spend most of the morning down around 0.3-0.5%, and Asia finding it hard to follow thorough further on the moves. The dollar found a small bid across the board as some of the light Asian positioning got squeezed, with EURUSD dipping to just above 1.42 and NZD pulling all the way back to 0.8412. Heading into London the market sits not far from similar levels as when Asia walked in, with NZD around 30pts higher.
HSBC Global Research