EUR: Opened early Europe at $1.2540, Euro-dollar closed in NY at $1.2529 after rate had been driven to extended recovery highs of $1.2539, from earlier session lows of $1.2431, following the release of dovish FOMC Minutes. Market reacted to the change in statement that many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming data improved (July Minutes had referred to ‘a few members’). Rate marked lows into early Asia at $1.2524 before getting pressured higher again, the eventual break of the barrier at $1.2550 instigated by a NY black box fund that took rate to session highs of $1.2553. Rate drifted off to $1.2529, on a mix of profit taking and reaction to weaker than expected HSBC China PMI data which bruised risk. Rate recovered to retest earlier highs into Europe, with further demand lifting the rate on to $1.2572 as stops above $1.2570 were targeted. A mix of fund profit take and reserve name sales eased rate back to $1.2537 but underlying tone remained buoyant. Offers $1.2580 to barrier at $1.2600.
JPY: Opened in early Europe at Y78.54 and Y98.47, opened in Asia at Y78.52 having recovered off Y78.28 lows following release of the dovish FOMC minutes. Dollar lifted marginally as equities opened on a positive tone and extended gains on importer demand ahead of the Tokyo fix to Y78.58. The pair ground lower with euro-yen to Y78.47, before dip demand recovered and settled in a tight range. Euro-yen mirrored dollar moves throughout the session, tied to a Y98.38 – Y98.62 range. Dollar-yen opened heavy in thin European trade and looked to re-test the overnight Asian low. The dollar bounced on sharp cross demand and extended gains to Y78.64, before late profit take sales eased to Y78.55 ahead of NY. Offers reported at Y78.80, ahead of Y79.00, with support at Y78.50/40, a break opens Y78.27 (22 Aug low). The cross slipped in tandem with the dollar to Y98.32, before a decent bounce aided by stronger than expected French flash PMI data recovered to Y98.60. Rate extended gains to Y98.82 where the rate stalled and slipped on profit take sales to close the morning around Y98.65.
Bond: German government bonds are higher Thursday, amid wider EMU peripheral yield spreads and in the wake of dovish FOMC minutes. However, Bunds are off their best levels, following fade lower in UK Gilts following comments from BoE MPC Member Martin Weale. “At this stage, my personal opinion is it’s not necessary to increase the size of the asset purchase programme”, said Weale. In an interview in French newspaper, Les Echos, Weale – who is described as a member of the ‘hawkish camp” by the paper – also said cutting the Bank Rate would generate ‘perverse effects’ and weaken the financial position of certain banks. Elsewhere, EMU peripheral yield spreads are wider following flash PMI data from France & Germany, where manufacturing PMI came in stronger than expected. Traders noted that the data signals that strength in core countries lessens the need for the ECB to act aggressively at the next Governing Council meeting on Sep 6. Periphery bonds are also lower after German Merkel signaled there will be no decisions taken at Fri’s meeting with Greek PM Samaras. Focus is on Merkel/Hollande meeting today.
Gold: Spot gold prices continue to extend their gains from the previous session, although price action has been more of a consolidation process for much of the morning. Gold held session lows of around $1652.60 during Asian traded hours and advanced to an intra-day high of $1667.15 shortly after the European equity cash market opened. Prices remain underpinned by firm expectations that the US Federal Reserve will unleash some additional stimulus measures at its next meeting, scheduled for Sept 12-13. Market participants of the precious metal will now be fully focused on Bernanke’s speech at the central bank symposium, due to be conducted at Jackson Hole on 31st Aug. Some support for spot gold is anticipated around the 200-day Exponential MA which is currently sitting around $1643.20 should prices decide to go into corrective mode. Plenty of market participants of gold see the technical break to the upside as too pre-emptive and are looking to fade the breakout around $1692 citing that weak demand for physical demand from India and Southeast Asia could hamper prices looking ahead. Spot gold currently trades $1662, up $7.35.
EasyForexNews Research Team