Forex Forecast

Euro In Search Of Drivers With Japan on holiday and the news wires virtually silent, overnight price action in Asia was subdued. Today’s light data calendar will only intensify the focus on Fed Chairman Bernanke’s congressional testimony due on Tuesday and Wednesday.

Bernanke In Focus News wires have been mercifully quiet over the past few days and today’s light data calendar will only intensify the focus on Fed Chairman Bernanke’s congressional testimony due on Tuesday and Wednesday.

UK Reveals Lending Scheme The BoE and UK Government announced details of their funding for lending scheme. The pound was largely unchanged on the announcements (since the surprise element of the June announcement was not there), though we expect pro-active policy to be rewarded by investors so, on the margin, would see it as a […]

Italy Downgraded Moody’s cut Italy’s sovereign rating by two notches to Baa2, citing an increased risk that funding costs could rise further possibly leading to a “sudden stop in market funding”.

Seeking Safety In Yen The downside remains the path of least resistance for the euro, with diminishing hopes of any fresh policy initiatives keeping investors on the defensive as EURUSD tested the waters below 1.22.

Further Risk Aversion Another wave of risk aversion swept the FX markets on Thursday. There were limited specific catalysts, but ongoing concerns over the global growth outlook, particularly after some mixed data out of China, alongside few signs of further Fed stimulus have kept demand for the dollar elevated.

BoJ Avoids Further Easing The Bank of Japan fine-tuned its easing program at today’s policy meeting but, crucially, stopped short of delivering any net new balance sheet expansion.

Aussie Employment Due The FOMC minutes published overnight showed little sign that the Fed is drifting towards another round of balance sheet expansion. Indeed only a “few members expressed the view that further policy stimulus would likely be necessary”.

FOMC Minutes Due With limited directional conviction, FX markets were confined to tight ranges once again in Europe, though the dollar was slightly soft ahead of the FOMC minutes due later today.

RBA Rules Nothing Out The euro held in a tight range overnight with no new headlines to push market opinion one way or the other. The accumulation of news over the past few days has been largely negative however – a fact that has not gone unnoticed in Australia.

Euro Retreat Euro bears have reasserted themselves, with the EURUSD retreat to levels below 1.2250 looking even more conspicuous in the face of the narrowing in peripheral spreads and gains in European equities.