GBP: Opened early Europe at $1.5814, stg0.7940, Cable closed in NY at $1.5819 after pulling back from a fix driven high of $1.5837. Early trade in Asia was restricted to a tight $1.5814/21 range, with a mid session push to $1.5823 meeting resistance which pressed it back to retest the early lows before settling between $1.5814/19 through to the European open. Euro-sterling was contained within a tight range around stg0.7940 through Asia, leaving cable to track euro-dollar moves, though overall trade was described as subdued. Cable touched $1.5820 into early Europe before turning lower, the rate tracking euro-dollar slippage, though part of the pressure was diverted to euro-sterling as this rate eased below stg0.7930. Euro-dollar recovery took cable to fresh intraday highs at $1.5826, with rate holding firm into late morning trade. Euro-sterling recovered off lows at stg0.79285, though held below stg0.7940. Markets generally seen in consolidation mode as traders await this week’s key event in Jackson Hole. US GDP and Beige Book this afternoon’s interest.
EUR: Opened early Europe at $1.2557, Euro-dollar closed in NY at $1.2564, following a lacklustre NY session which had seen rate consolidate mainly between $1.2555/70 (NY range $1.2536/77), after rate had recovered off earlier Asian lows of $1.2466. Rate initially edged to $1.2571 in early Asian dealing on CTA demand but this early positive tone quickly faded with rate drifting to $1.2553. Rate recovered to $1.2561, retested the lows before edging on to $1.2566 ahead of the European open. Fresh selling emerged into Europe, with sales of euro-dollar, and euro sales via crosses, took the rate through $1.2550 before meeting support between $1.2535/30. Rate based at $1.2532 before German name buys of euro-Pln, the US investment house demand reversed the move and took rate above Asian highs and on to $1.2574 before momentum faded. Rate was holding back at $1.2560 in late morning trade. Position adjustments ahead of Jackson Hole continues, with market also left open to headline comments from Eurozone officials. Offers $1.2580/00 expected to provide a hurdle to further upside progress.
JPY: Opened in early Europe at Y78.54 and Y98.63, Dollar-yen opened in Asia at Y78.52 and lifted ahead of the Tokyo fix on Japanese name demand, reserve manager supply kept the rate in check and trade was largely rangebound, Y78.50 – Y78.63. Euro-yen opened on a bid tone ahead of the fix to Y98.79, later easing to Y98.67. CTA demand in euro-dollar lifted briefly as markets continued in tight ranges ahead of Friday’s Jackson Hole. Dollar-yen headed higher in Europe to Y78.58 before meeting resistance, the pair squeezed lower in tandem with the cross to Y78.48, later consolidating above Y78.50. Support seen at Y78.30/25, a break opens demand at Y78.20 from reported importer/gamma names. Euro-yen opened heavy and sharp euro-dollar slippage added weight to print Y98.38. Support in the dip recovered and the cross extended gains to Y98.70 on German name demand, later easing to Y98.60. Tech resistance seen at Y98.78 from the Asian high and Ichimoku cloud top, a break opens strong offers at Y99.00, ahead of Y99.20 with stops set.
Bond: German government bonds are trading higher Wednesday, but off their best levels after ECB President Mario Draghi said the ECB will only act within the limits of its mandate but may nevertheless have to employ exceptional measures. Sep Bunds opened lower, but reversed opening weakness amid risk-off, as EMU peripheral spreads widen led by Spain. Traders also reported stop-loss buying in Sep Bunds following break above 144.17 Fibonacci level — 61.8% of the decline from 146.26 to 140.78. Italy 10-year spreads widened in early trade after Fitch Ratings late Tuesday downgraded 7 Italian banks and comes as market prices in concession ahead of the launch of the new 10-year BTP for up to E4.0bln. However, Italy 10-year yield spread has reversed earlier widening — now at +447bps vs +456bps earlier following successful E9.0bln 6-month T-bill auction — sold at avg yield 1.585% — lowest since March and covered 1.69 times. In other supply news, the EFSF opened books for its new E3.0bln 10-year bond with initial guidance at MS +54/57bps via Citigroup, HSBC and J.P. Morgan.
EasyForexNews Research Team