Mid-Day FX Market Analysis

EUR – Closed in NY at $1.3291 after rate had recovered off session lows of $1.3257 to $1.3311 before settling between $1.3275/00 through to the close. Euro-dollar trade mainly dictated by cross plays, with this scenario carrying across to Asian dealing Thursday, the rate edging to a high of $1.3315 as it tracked early euro-yen demand, then dropped back to $1.3270 during the Asian afternoon. Recovery to $1.3287 ahead of the European open aided by euro-yen positive reaction to Japan Amari comments that he found it regrettable that his recent yen comments had been misinterpreted. This react recovery continued into early Europe as rate edged on to $1.3307, but struggled in this initial move to build. Rate dipped to $1.3280 before picking up stronger demand interest, the move through $1.3315, then $1.3320/30 resistance, prompted talk of middle eastern monetary authority buying behind the move. Resistance above $1.3350 restricted the initial break to $1.3356, with profit take supply from macro names eased rate to $1.3331. This dip proved short lived, decent Spanish auction result taking rate to extended highs of $1.3363. Underlying tone firm in late morning trade, though off best levels.

GBP – Closed in NY at $1.6007 after rate had recovered off pressured lows of $1.5975 to $1.6015, the rate edging back up from a late corrective pullback to $1.5982 into the close. Cable squeezed down to $1.5992 in early Asia before recovering to $1.6018 where it met decent resistance placed into $1.6020. Cable drifted off highs, trading to a session low of $1.5982 as yen gains dictated moves. Cable recovered in late Asia, moving up to $1.6008 into early Europe as yen pairs spiked higher on Japan Amari saying he regretted that his recent comments on the strength of the yen had been misinterpreted. This comment by Amari prompted risk-on demand into early Europe, with euro demand, via euro-yen buying, leading the move. However, cable again showed that it is struggling to take full advantage of risk-on interest, recovery faltering around $1.6026 which allowed euro-sterling to extend its recent recovery to stg0.8336. Interested sellers into the cross rally provided cable with some buoyancy mid morning, but rate couldn’t break above resistance at $1.6030. Another wave of euro demand post the Spanish bond auction extended the cross rise to stg0.8344, while cable held steady sub $1.6020. Cross offers have been seen into stg0.8350.

JPY – A late Asia comment from Japan Amari regretting that recent comments warning on the effects of a weakening yen had been misinterpreted prompted a spike up from Y88.35 to Y88.70, the move up greeted by Japanese lifer supply which eased it back to Y88.53. Euro-yen was hiked up from Y117.34 to just shy of Y118.00. Earlier in the Asian session the rate had lifted from an opening level of Y117.48 to Y118.20 before it slipped to Y117.01 on macro sales. Dollar-yen had seen early highs of Y88.80 before it dropped back to Y88.14, in line with the cross. The yen pairs consolidated gains in early Europe with trade tied to narrow ranges. Macro/Middle-Eastern demand flushed stops in euro-dollar and euro-yen lifted to Y118.50, dollar-yen to Y88.80. Risk appetite increased with cross demand the main driver, dollar-yen extended through Y89.00 to highs of Y89.25 as traders flashed a major US bank seen buying up to $1bln. Euro-yen tracked the move and triggered light stops to Y119.21, late profit take sales eased to Y119.00, the dollar to Y89.10.

Looking Ahead:
– US data gets under way from 1330GMT, with the release of Jobless Claims for the Jan 12 week and the Housing Starts, Building Permits data for December. The level of initial claims is expected to fall 1,000 to 370,000 in the January 12 employment survey week after rising by 4,000 in each of the previous two week. Some disruptions early in the year make the data somewhat suspect, but it is clear that there has been some upward movement since early December to bring claims back in line with their pre-hurricane levels. Claims were at a level of 362,000 in the December 15 employment survey week.
– The pace of housing starts is expected to rebound to a 890,000 annual rate after falling 3.0% in November. Permits rose in November and the NAHB index climbed further in December, positive signs for housing starts.
– The Bloomberg Comfort Index for the Jan 12 week will be released at 1345GMT. At 1500GMT, the January Philidelphia Fed Survey is expected. The Philly Fed index is expected to rise to a reading of 6.0 in January after see-sawing in November and December following Hurricane Sandy.
– At 1530GMT, the EIA Natural Gas Stocks for the January 12 week are released.
– At 1700GMT, the US Treasury releases the dealer agenda, questions ahead of the February quarterly refunding.
– Central bank speakers are to the fore later in the session. At 1705GMT, Atlanta Federal Reserve Bank President Dennis Lockhart gives an interview at a business forum in New York.
– From 1900GMT, Bundesbank Board member Andreas Dombret speaks on “The Stability of the European Financial System and the Real Economy in the Shadow of the Crisis,” in Dresden.
– At 2130GMT, the Money Supply (M2) numbers for the Jan 7 week will cross the wires.


EasyForexNews Research Team