Forex Forecast

Fed Drives Markets Market attention quickly shifted towards the US as the dollar traded on a soft note overnight. Despite, Italy and Spain fixed income markets coming under pressure once again, the euro pushed higher as part of the broader dollar move.

Dollar In Retreat The dollar continued to weaken during the Asia session in the wake of the Aug. 1 FOMC minutes, although the sell-off was briefly interrupted by a weak private sector flash PMI out of China.

Dollar On The Defensive The minutes of the last FOMC meeting were more dovish than the market expected, triggering a broad-based USD sell-off during NY hours.

Fed Commentary Due FX markets consolidated the majority of yesterday’s gains, with the DXY trading flat in the European session. Most major equity markets were trading slightly in the red at the time of writing, though news flow was relatively light ahead of the FOMC minutes due later in the US session.

Europe Hurts Japan Exports The impact of the Eurozone debt crisis is now having a pronounced effect on Japan’s export industry. Exports to the EU fell by -25.1% y/y while those to China dropped -11.9% y/y.

EUR Rallies Risk was supported by positive commentary from the Eurozone officials. German lawmaker and the ruling CDU party’s budget spokesman, Barthle, said “small concessions” are possible for Greece.

Optimism Builds The recent optimism in financial markets continued on Tuesday, with the dollar selling off versus most risk currencies and the euro. CDU budget lawmaker Barthle, in an interview with Bloomberg, said “small concessions” are possible for Greece, suggesting that the loan interest and maturity could be adjusted, which would likely pass in the […]

RBA Reveals Central Bank Buying The RBA minutes from the August policy meeting were the highlight of the overnight session in Asia. The RBA again referred to the unusual strength of the Australian dollar which persists despite the weakening global outlook and the falloff in commodity prices.

EUR Resilient On a day of limited data releases, EUR came under selling pressure in the early hours of NY trading after the ECB refuted the Der Spiegel report that the central bank plans to set a cap on sovereign yields.

Bundesbank Holds Firm The euro reversed its early gains in the European session as the optimism surrounding an article in German paper Der Speigel about ECB bond-buying quickly faded The article itself reported that the ECB is considering setting a cap on Eurozone sovereign yields (defined as a maximum acceptable spread over German paper).

Greece Back In Focus USDJPY held onto last week’s gains, despite Japan’s return from a week-long holiday. The pair even set a new 5-week high of 79.66 before settling back down again.