FX Market Analysis

GBP: Opened early Europe at $1.6075, stg0.8007, Cable closed in NY at $1.6073 after rate eased off highs at $1.6085 to $1.6067. Rate eased to retest that NY pullback low but again found support here. Rate then edged to $1.6073 before dropping back to $1.6065 as market probed for stops. Willing buyers met the dip and took rate to $1.6080 but momentum quickly faded and allowed rate to ease off to $1.6069. Euro-dollar got a late session spike higher as it reacted to Spain headlines on possibility of asking for ECB aid, the move taking cable to extended highs of $1.6086. Rate then settled around $1.6077 into Europe. Cable retained a buoyant tone into Europe with early demand taking rate to $1.6097 before countered by option linked and corporate offers placed into $1.6100. Rate came back higher again ahead of the German Court decision on ESM, trading at $1.6101 before dropping back to $1.6075. Strong demand emerged into the dip, with recovery boosted on ESM ratification that took rate on to $1.6128. Stronger than expected jobs data allowed rate to extend recovery to $1.6131 ahead of NY.

EUR: Opened early Europe at $1.2872, Euro-dollar closed in NY at $1.2851 after rate had eased off extended highs of $1.2872 to $1.2845. Rate held just above $1.2850 into early Asia, a US name made it known that they had decent demand at $1.2845. Rate dipped to $1.28465 before bouncing back, meeting resistance from offers ahead of Tuesday’s high at $1.2872 before it eased to $1.2858. Wire headlines that Spain’s Rajoy was considering asking for help from ECB bond buying programme lifted rate on to $1.2883. Enthusiasm quickly faded with rate drifting off to $1.2870 into early Europe. Rate bounced from $1.2866 to $1.2886 before meeting UK clearer supply. Rate squeezed down to $1.2855 on Asian reserve sales, recovering to $1.2870 into German Court ESM decision. Voice recognition algos were linked to the sell off to $1.2816, though others noted heavy UK clearer sales again, as judges began verdict, but buyers quickly emerged into the dip. Rate jumped to $1.2901 on the ESM ratification verdict though macros sold back into the move. Bounce off $1.2870 saw rate touch $1.2906.

JPY: Opened in early Europe around Y77.85 and Y100.20 Japanese accounts were noted buyers of dollar-yen and euro-yen into Asian trade, after rate had seen lows of Y77.70 in NY. Trade in Asia was contained by Y77.74/97 and Y99.92/100.30. Traders did note a lack of comment from Japanese officials, despite the yen strengthening to levels official action – or at least jawboning – was expected. Rate respected the overnight parameters through the European morning with rate favouring the topside ahead of the NY open after FinMin Azumi comments eventually emerged to warn markets of possible ‘serious’ action. This move up in dollar-yen allowed euro-yen to track euro-dollar gains, moving up to Y100.46 as the German Court ratified ESM (though with some conditions0. Offers placed at Y100.45/50 capped the move with settling back at Y100.37 into late morning trade. Thursday’s FOMC policy announcement continues to provide a counter to dollar-yen gains, expected further liquidity measures, and the effect on US yields, weighs back on dollar-yen, though the prospect of intervention remains.

 

EasyForexNews Research Team