FX Fundamentals View

EURO The euro depreciated sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2730 level and was capped around the $1.2875 level.  European sovereign credit jitters continued to dominate news headlines and trading activity today.  Yields on credit default swaps for Greece and Ireland reached very high levels today and there is renewed talk of a possible Greek default.  Dealers cited speculation that stress tests conducted in the eurozone

FX Weekly Review-30th August-5th September 2010 By George Tchetvertakov, Head of Market Research •Mixed macro data from the G20 led to mixed price action in most currency pairs •A broadly risk-neutral week included several positive surprises to appease the recovery skeptics. Double-dip fears in the US eased away from the brink with additional Fed easing now more likely to be delayed further •Swisse strength once again making the headlines as EUR/CHF tested fresh record lows – central bank

The Wall Street Journal said European stress tests for banks understated some holdings of sovereign debt. With German factory orders sliding as well, the Euro was pressured amid general risk aversion. The USD/JPY meanwhile proved a fresh 15-year low as traders saw signals from the BOJ that it would not directly intervene in currency markets.

As we finished up last week with US Nonfarm Payrolls, we were left with a taste of risk-taking. US stocks breached resistance and the dollar flopped, barely holding on above support. Now starting this week we wouldn’t be surprised to see some sort of consolidation (pullback, or sideways move) ... as major data reports are sparse. There have been and will be, however, central bank meetings and decisions. The Bank of Japan and the Reserve Bank of Australia are already out of the way with barely a

The upward momentum in Asian currencies has continued unabated over recent weeks the gyrations in risk appetite. Most Asian currencies have registered gains against the USD over 2010 with the notable exception of one of last year’s star performers, KRW which after gaining by close to 9% last year has weakened slightly this year. Last year’s best performer the IDR which raked in close to 20% gains over 2009 versus USD has continued to strengthen this year, albeit to a smaller degree. Another

Previous session overview The euro lost ground against both the dollar and the yen Tuesday as market concerns about the financial health of European banks came back to the fore. The euro was at USD1.2807 and JPY107.67 as of 0450 GMT, from USD1.2879 and JPY108.51 in late London trading on Monday (New York was closed for a holiday). Elsewhere, the Australian dollar fell against the yen and U.S. dollar on a dovish statement from the Reserve Bank of Australia, and confirmation that Julia Gillard's

Headlines Currencies: CEE currencies slightly lower in step with global sentiment Fixed Income: Czech state easily sells EUR 2bn of Eurobond Czech Republic Czech koruna eased as it party tracked the weakening forint on Monday. The forex market just monitored a mixed bag of domestic macro data and completely shrugged of a successful issuance of the Czech government Eurobond. Recall, that the Czech state easily sold EUR 2bn of the new 10Y Eurobond denominated in euro. The demand was huge – more

Markets revive, backed by positive regional indicators Asian markets were on the upside over the last week, encouraged by strong regional indicators and improved global sentiment. China’s PMI and 2Q GDP for Australia underscore Asia’s economic vitality China posted a better-than-expected August PMI (see Highlights). Moreover, 2Q GDP growth in Australia also beat expectations (3.3% y/y, consensus: 2.8%), as domestic and external demand improved. That said, Korean exports fell in August (see

U.S. remains the focus... After a summer where the concern about the growth of developed countries (especially US growth), has been on the forefront, markets awaited Bernanke´s words at the Jakson Hole meeting. The chairman said that the Fed is ready to do whatever it takes to support the economy if growth prospects deteriorate significantly. Still, while he remarked that the economy has lost track, he considers that growth is likely to pick up next year. Macro data this week was better than

Market Brief The Reserve Bank of Australia (RBA) kept their benchmark interest rate unchanged at 4.50% this morning. Amidst the rather healthy data releasing from Australia (the recent Q2 GDP), the fourth straight pause was largely expected. Growth down under has been close to trend, the inflation level is close to target and with the global growth recovery still shaky, policymakers from down under don’t want to be too aggressive in tightening monetary policy. The Aussie has been weaker across

AUDUSD – RBA on hold, Labor party forms government As expected, RBA didn’t change interest rates, citing uncertainty in global prospects. Weaker US economy and steps taken by the Fed may indeed discourage RBA from further tightening any time soon, but then again, a cut – speculated as recently as 2-3 weeks ago – seems to be definitely out of the picture. The key news from Australia, however, refers to politics. After some drama, Labor Party attracted 2 of 3 independent lawmakers, just enough

Given the Labor day setting markets were fairly quiet yesterday with the lack of liquidity not affecting flows in a meaningful way. Sterling was sold heavily however breaking to new monthly lows against the newly resurgent euro. The pair reached a low of 1.1918 before crawling back towards the mid 1.19s. We do see GBPEUR moving towards the 1.18 level however today’s move was at the behest of irrational market conditions. Overnight however BRC shop prices have continued the pressure on sterling

On Monday, EUR/USD trading took a very slow start of the new trading week. US markets were closed for the Labour day Holiday and no important eco data were on the agenda in Europe. So, there was no big story to inspire trading. EUR/USD reached a new correction high early in European trading close to 1.2920, but a test of the 1.2923 resistance level (August 18 reaction high) was rejected. European equities had a soft spot during the morning session. EUR/USD dipped lower in step and the pair was

Today, movements are within narrow range in the absence of economic fundamentals from major economies and due to Labor Day holiday in the United States and Canada. The dollar is showing slight incline against a basket of major currencies as depicted by the dollar index which rebounded from support at 81.90 to record a high of 82.13 after falling over the past two weeks. Concerning the euro-dollar pair, it is showing slight decline on the daily and 4-hour charts as a correction after four

Although the news out recently did not seem to be too worrying as far as the UK was concerned, it was a week which felt a bit like a dormant volcano. It appears that as the week progressed there was more and more chance of a renewed recession, which is instilling fear into the economy and into sterling. Last week we saw GBPEUR drop from 1.22 point to today’s circa 1.19, a clear sign that there is something circling in the waters below our lilo. Last week I spoke about the housing market which

Australian rate decision is the major event on our calendar. Here Is an outlook on today’s market moving events. In Europe, German Factory Orders a leading indicator of production released monthly has registered 3.2% rise in June. A smaller rise of 0.6% is expected in July. In Great Britain, Halifax HPI a leading indicator of the housing industry’s health experienced a promising 0.6% rise in July however a drop of 0.3% is expected in August. More in Great Britain, BRC Shop Price Index released

The market was quiet yesterday due to the lack of data and the Labor Day holiday in the US. While Asian stocks rallied as a response to last week’s employment report and European bourses crawled higher, the overall tone remains cautious as investors continued to expect slower growth and lower inflation in the second half of the year. The data that might have caught attention was Engineering Employers Federation (EEF)‘s manufacturing report which showed that UK’s output and new order balances

News and views Risk markets generally remained elevated during a quiet European session, trading thinned by the US Labour Day holiday. The Eurostoxx50 equity index closed 0.3% higher, and S&P500 futures ranged sideways at the month high until Europe closed. Commodities recorded modest moves, oil down 0.7% as the summer motoring season ends, copper up 0.5% on an inventory decrease, and other industrial metals also faring well. UK and German 10yr government bonds closed 1-2bp lower in yield.

Australian Dollar: The Aussie dollar traded sideways since the commencement of the week’s trade bouncing between 0.9145 and 0.9175 for the majority of Monday’s Asian session and last night’s offshore trade. A weaker Euro halted any attempts to retest the 92 cent handle in London exchange overnight sending the AUD to 0.9150, and with the U.S markets closed for the Labour Day holiday the AUD/USD opens this morning relatively unchanged at 0.9170. Today the market is anticipating the conclusion of

EURO The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2865 level and was capped around the $1.2920 level.  Liquidity was lighter-than-normal on account of the ongoing U.S. Labour Day holiday weekend and will normalize tonight.  The common currency reached its strongest level since 18 August before giving back intraday gains.  There are renewed concerns today about the eurozone sovereign debt crisis and these are negatively