EUR Weakness Persists
Euro weakness across the board continued in the European session. Overall risk appetite was fairly stable across other markets but the euro pushed lower versus both safe-havens and risk currencies. The catalyst for the leg lower came with comments from Angela Merkel with Bloomberg reporting the Chancellor as saying that she was unsure if the European project would work, but investors needed few excuses to continue their selling of euros. GBP also underperformed after the BoE’s MPC voted 7-2 to raise QE total by GBP50 bn. While some had been looking for a 9-0 vote, the comments that GBP75 bn was also discussed prompted some selling. The MPC discussed the policy rate cut option, but decided against it. The committee will revisit the issue once the impact of the FLS is clear. In their view, that is unlikely for several months. UK Employment data was largely in line with consensus with the June claimant count jobless up 6.1k against forecasts for a 5k rise. EURSEK dropped below 8.50 on limited newsflow. Liquidity is clearly playing a role in the move but wider diversification flows are likely to keep the pair trading heavy.
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