Forex News

Split fortunes for FX ahead of Bernanke

ssmith — Wed, 22 May 2013 10:22:18 +0000

The surprise fall in UK retail sales data and latest MPC minutes were the impetus for the sterling move. The euro appears once again to be benefiting from weakness in the yen. For some, the divergence between central bank balance sheets in Japan (expanding) and the eurozone (contracting) makes EURJPY the better means by which to short the yen.

Cable softer on MPC minutes

ssmith — Wed, 22 May 2013 08:35:07 +0000

GBPUSD around 40 pips lower to 1.5090 after minutes to May BoE meeting show 3 members still voting for more QE. EURGBP to 0.8574. Retail sales fell 1.4% in April according to data released at the same time.

Sterling down on weaker CPI data

ssmith — Tue, 21 May 2013 08:36:48 +0000

GBPUSD down 35 pips to 1.5190 after better than expected CPI data, headline rate now 2.4% and first time for nearly a year that inflation better than expected.

The waiting game

ssmith — Mon, 20 May 2013 12:12:44 +0000

A predictably slow start to the week in FX markets. There are no major market moving data releases scheduled for today, with the market waiting for Wednesday. On this day, the minutes to the latest Fed meeting in the US will be released and the Fed Chairman Bernanke also speaks to Congress. As we mentioned in the Daily Brief, the market is becoming more sensitive to talk of a possible slowdown in the pace of asset purchases from the Fed, but we don't see this happening this until late summer at the earliest.

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USDCAD above 1.03

ssmith — Fri, 17 May 2013 12:37:30 +0000

USDCAD 20 pips higher and above 1.03 on back of CPI, which showed annual rate falling to 0.4% (from 1.0%). The market was looking for a 0.6% outcome, with the core rate also a touch better than expected at 1.1% (from 1.4%). EURUSD down to 1.2820, with a number of stops taken out just ahead of the Canadian figures.

Cable higher on latest BoE forecasts

ssmith — Wed, 15 May 2013 09:39:36 +0000

GBPUSD around 20 pips higher to 1.5260 on BoE's latest forecasts upgrading growth and downgrading inflation. These latest projections, contained in their quarterly Inflation Report, are seen as reducing the change of more quantitative easing, which three members of the monetary policy committee have been voting for during the February to May period. We wait for next week to see the latest minutes and whether these 3 members have maintained this stance.

Dollar dominance

ssmith — Wed, 15 May 2013 08:00:34 +0000

The dollar is once again dominant at the start of the European session. The weaker than expected German GDP data gave some impetus to the move, pushing EURUSD below the 1.29 level ahead of the Eurozone numbers due to be announced at 09:00 GMT. At the same time, USDJPY has carved out a new high for the year (again) at 102.62, with AUDUSD making a new low at 0.9852. The dollar itself (looking at the DXY dollar index) is 0.40% from the 2012 high (84.1). Breaking this would put the dollar at levels last seen nearly 3 years ago.

Aussie lower on budget headlines

ssmith — Tue, 14 May 2013 10:14:17 +0000

A reality check for Australia today as budget numbers are revised. Previously the government were predicting a budget surplus for this year, but the continued strength of the Aussie, together with the reversal in commodity prices have reminded the Australian government that nothing lasts forever and it's dangerous to ever assume so. Still, all things are relative and the budget and growth situation in Australia is a far cry from what we are seeing in most other major economies and a world away from the eurozone periphery.

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Cable slipping into close

ssmith — Mon, 13 May 2013 15:55:03 +0000

After a relatively subdued session, cable is falling into the European close, having broke through the 1.53 level to trade us back to levels last seen in the wake of the stronger than expected GDP data released towards the end of last month. No specific factors behind the move beyond order being triggered in a light start of the week session.

Stronger US sales lift dollar

ssmith — Mon, 13 May 2013 12:34:11 +0000

EURUSD down 20 pips to 1.2950 after stronger US retail sales, rising 0.1%, vs. expectations for 0.3% fall. USDJPY at 102.00, AUDUSD 0.9957.

Green light for the yen

ssmith — Mon, 13 May 2013 07:06:25 +0000

The stance of G7 leaders on the yen and currencies in general remained unchanged at their meeting over the weekend. As such, the yen touched above the 102 level on USDJPY in Asia trade before pulling back to 102.60. Whilst there may be bigger concerns from Japan's major Asian trading partners (such a South Korea), G7 leaders appear content with the weaker yen, so long as policies do not specifically target exchanges rates.

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UK policy unchanged, along with sterling

ssmith — Thu, 09 May 2013 11:05:02 +0000

GBPUSD little changed as Bank of England keeps asset purchases and rates unchanged, as expected. GBPUSD at 1.5580 and EURGBP 0.84390. Recent data has been a little better than expected, undermining the arguments of the 3 members that have voted for more quantitative easing in the February to April meetings. We have to wait for the minutes later this month to see if they changed their vote.

GBP higher on production data

ssmith — Thu, 09 May 2013 08:36:00 +0000

GBPUSD up 30 pips to 1.55.85 after stronger production data, up 0.7% MoM, expected 0.2%. EURGBP 0.8450. Waiting for BoE decision at 11:00 GMT. No change seen.

EUR at session highs, EURJPY above 130

ssmith — Wed, 08 May 2013 10:10:26 +0000

EURUSD at session highs just below 1.3140 after data showed German production rising 1.2% in March, market anticipating marginal decline. EURJPY back above 130.

Down under moves

ssmith — Wed, 08 May 2013 07:34:04 +0000

The main mover overnight was the kiwi, with comments by the central bank governor Wheeler suggesting that the RBNZ were becoming more concerned with the strength of the currency. We pointed out yesterday the fact that AUDNZD had been moving lower for the previous 7 weeks and this was likely to be cause for concern for the central bank. Back in February, Wheeler pointed out that the kiwi was not to be considered a one-way bet and whilst initially this did turn the currency around, it currently stands around 1% firmer vs. the levels prevailing at this time.

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EUR and GBP hurting, JPY surging

ssmith — Tue, 07 May 2013 14:40:20 +0000

The afternoon session is seeing both sterling and the single currency losing ground to the dollar, whilst the JPY has once again taken fright at the proximity of the 100 level on USDJPY. As such, EURJPY has retreated fairly sharply from the 130 level, with GBPUSD back below the 1.55 level. A close below here has not been seen for over a week now. There appear to be no specific reasons for the moves seen this afternoon, the only general feeling is that traders are reluctant to push significant breakouts, preferring the comfort of more established ranges.

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EUR up on stronger German data

ssmith — Tue, 07 May 2013 10:18:30 +0000

In an otherwise quiet session, EURUSD has moved back above the 1.31 level on the back of stronger than expected German Factory Orders data for March, rising 2.2% MoM, the same as the prior month increase. EURJPY has also nudged back above 130 after the data.

Ahead of payrolls...

ssmith — Fri, 03 May 2013 09:40:40 +0000

Markets are treading water ahead of the US numbers later today. The main exception has been the euro, where there has been some modest buying through the 1.31 level as some take advantage of the lower levels. As we mentioned in our daily, the dollar reaction to data surprises has been falling of late, so becoming less strongly correlated with positive and negative data surprises.

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Euro modestly higher on ECB rate cut

ssmith — Thu, 02 May 2013 11:56:57 +0000

The European Central Bank has cut its benchmark lending rate by 0.25% to 0.50%, broadly as expected. What perhaps was more interesting was the fact that the ECB cut the marginal lending rate by 50bp to 1.00%. This is the penalty rate at which banks borrow overnight from the ECB. The deposit rate at which banks deposit money back at the ECB (because they have excess liquidity and do not want to lend to other banks) was kept at zero.

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Waiting for the ECB

ssmith — Thu, 02 May 2013 07:40:15 +0000

Although a rate cut from the ECB is broadly (but not fully) expected by markets, there is still an air of uncertainty for 3 main reasons. Firstly, if the main refinancing rate is cut to 0.50%, the question is what happens to the deposit rate, currently set at zero. In normal times, the deposit rate has been 1% below the refinancing rate, acting as an incentive for banks not to park money at the ECB and lending it out. A negative rate could end up punishing well-capitalised banks and potentially encouraging money outside of the eurozone.

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GBP firmer on manuf PMI

ssmith — Wed, 01 May 2013 08:41:39 +0000

In an otherwise quiet session, sterling had initially gained 50 pips (to 1.5590) on the back of the stronger manufacturing PMI data seen for April, with the headline rising to 49.8 and the previous month revised up to 48.6. The series has been in negative territory for 3 months now, but this latest releases is at least being taken as an early sign that the economy may be able to keep its head above water in the second quarter. Note that BoE members Bailey and Broadbent speak later today.

Euro remaining buoyant

ssmith — Tue, 30 Apr 2013 14:04:10 +0000

The month end is instigating some decent buying of the single currency. The weaker Chicago PMI number (49.0 from 52.4) saw some decent buying interest push EURUSD to the day's high at 1.3150, with only a modest softening seen in the wake of the US consumer confidence data (68.1 from 61.9).

Eurozone inflation falls

ssmith — Tue, 30 Apr 2013 09:14:54 +0000

EURUSD fell down to 1.3060 (but since recovered), as CPI estimate for eurozone came in weaker at 1.2% (from 1.7%). Weaker inflation data from Germany yesterday had prepared the market for a fall in this number. Whilst we were not convinced the ECB were going to cut rates this week, this data probably seals some sort of policy action, be it a rate cut, or a change in the deposit rates or other "non-standard" measures. But it's not just about Germany. Inflation is also falling in the periphery, with the inflation rate having halved in Spain over the past 6 months, from 3.5% to 1.4%.

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European opening moves

ssmith — Tue, 30 Apr 2013 07:30:40 +0000

We are seeing some volatility at the start of European trading, but this is to be expected on the last day of the month when a lot of month-end related flows take place. EURUSD saw a brief push above 1.31 which soon met with offers, whilst the dip in cable has met with some buyers below the 1.5480 area. German labour market numbers at 07:55 GMT will be the next focus, the market sensitive to signs of further weakness in the eurozone's biggest economy ahead of the ECB meeting on Thursday.

The shifting yen

ssmith — Mon, 29 Apr 2013 13:47:06 +0000

Interesting to note the shift in sentiment towards the yen beyond the recent price action. We've seen this in the weekly portfolio data, which has shown Japanese investors cutting overseas holdings of investment for 6 straight weeks and not diversifying overseas as was anticipated after the BoJ decision. The weekly CFTC data has shown a reduction in the net yen short positions in the market (for non-commercial investors) and reports from investment banks also suggest that the bigger players are getting more tired with long USDJPY positions.

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Holding pattern for the euro

ssmith — Mon, 29 Apr 2013 11:43:10 +0000

With the ECB meeting later this week and the US employment report on Friday, FX markets are starting the week on a relatively quiet footing. The single currency breathed a modest sigh of relief as local markets reacted to the formation of a government over the weekend. Italian bond yields (10 year) pushed below the 4.00% level. But this does follow a period during which the bond market was fairly immune from the fact that the country had not formed a government over this time.

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USD Weaker after GDP data

ssmith — Fri, 26 Apr 2013 12:33:59 +0000

EURGBP firmer by around 20 pips to 1.3020 after US GDP falls short of expectations, up 2.5% ann. in Q1 (expected 3.0%). USDJPY down to 98.40.

EURUSD back below 1.30

ssmith — Thu, 25 Apr 2013 14:32:15 +0000

EURUSD below 1.30, down 100 pips in past 2 hours. EURGBP close to 3-month low, currently 0.84163.

Big relief on sterling

ssmith — Thu, 25 Apr 2013 08:38:32 +0000

GBPUSD up more than 1-big figure to 1.5400 after GDP rose 0.3% in Q1 (expected 0.1%). After the 0.3% decline in Q4 2012, this means that the UK economy was essentially flat over the past 6 months. The reaction on the currency is a lot for a GDP release 0.2% above expectations, but this reflects 2 things. Firstly, the fact that the market was fearful of a decline leading to increased pressure for more QE. Secondly, the media (for what it's worth) will now not be able to talk of a tripe-dip recession. This also means that the uptrend in cable in place from a technical perspective.

German IFO disappoints

ssmith — Wed, 24 Apr 2013 08:13:01 +0000

EURUSD initially pushed down to the 1.2960 area in the wake of the disappointing German IFO data, the headline series falling to 104.4, from 106.7. The market was expecting a modest decline, but this was much weaker than expected, the biggest downside miss vs. expectations for 11 months. It was soon after this previous IFO disappointment that the ECB last cut rates from 1.00% to 0.75% in July of last year. Expectations are increasing that the ECB may cut rates next week and it appears more likely than not that we will see a further rate before the summer.

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Fighting back

ssmith — Tue, 23 Apr 2013 14:19:19 +0000

The US data was only marginally better than expected (417k increase in new home sales) but has offered some more impetus to those fighting against the trends of this morning. EURUSD is back above 1.30 and USDJPY has seen a sizable reversal to the 99.50 area. This reverses the move seen during Asia trade on the back of the weaker China PMI data, further suggesting the yen's safe haven status is eroding and proving only transitory.

German PMI weighing EURUSD below 1.30

ssmith — Tue, 23 Apr 2013 07:45:04 +0000

EURUSD has pushed below 1.30 as German flash PMI data falls short of expectations. The move also exacerbated by the firmer French numbers, which initially pushed to 1.3084. Mention in the interbank market of stops at 1.2990, so break of here could see a more sustained move lower.

Cable pushing higher

ssmith — Fri, 19 Apr 2013 08:42:00 +0000

Cable above 1.5350 during the European session, with this largely an order-driven market, rather than one reacting to news flow. For the yen, the overnight weakening being followed through during the European session USDJPY holding above the 99.00 area.

Gold pushing for 1400 again

ssmith — Thu, 18 Apr 2013 12:47:08 +0000

Gold is pushing for break above $1,400 again, something not achieved since the sell-off of Monday. So only around 30% of the decline (Friday high, Tuesday low) has been reversed and failure to close above this week will likely set up a technically bearish outlook to the start of next week.

Sterling little changed on sales data

ssmith — Thu, 18 Apr 2013 08:34:29 +0000

GBPUSD little changed at 1.5235 after -0.8% MoM fall in retail sales, in line with expectations after revisions to Feb. Sterling now looking to GDP next week.

CAD softer on BoC statement

ssmith — Wed, 17 Apr 2013 14:08:47 +0000

USDCAD nudging higher on the back of the statement emerging from the Bank of Canada meeting today. The BoC has revised down their growth outlook for this year from 2.0% to 1.5%. They also note that "material slack" has emerged in the economy, so on the basis of this they say policy is appropriate "for a period of time", the same phrase used at the meeting last month. After some initial wobbles, USDCAD little changed around 1.0270 on the back of the statement.

Still a push for more QE in the UK

ssmith — Wed, 17 Apr 2013 08:35:58 +0000

GBPUSD 20 pips softer to 1.5305 after Bank of England minutes show 3 members voting for more QE for 3rd consecutive month.

EURUSD softer on ZEW

ssmith — Tue, 16 Apr 2013 09:07:56 +0000

EURUSD 10 pips softer to 1.3040 after weaker than expected ZEW data for Germany. EZ CPI held steady at 1.7%.

Sterling softer on CPI

ssmith — Tue, 16 Apr 2013 08:36:43 +0000

GBPUSD slightly softer to 1.5290 (10 pips lower) after CPI and PPI data broadly as expected. CPI held steady at 2.8%, but core rate nudged up to 2.4%.

Friday risk rout

ssmith — Fri, 12 Apr 2013 15:25:12 +0000

Gold is now below 1500 (down 4%) on biggest once day fall for 13 months in what can generally be described as a Friday rout in risk. USDJPY has made a sustained move back below the 99.00 level with the Aussie also also suffering and below 1.05.

Risk about turn

ssmith — Fri, 12 Apr 2013 09:32:27 +0000

The generally risk-positive moves seen for most of this week are reversing today. EURJPY is more than 1% lower in European trade to low of 129.02. USD also doing well, but not keeping up with JPY, USDJPY at 98.94. Gold down 1% to 1549. As eurozone finance minister meet to discuss the finalisation of the Cyprus package, the sign that a further EUR 6bln may be needed is not helping sentiment towards the single currency, hence the underperformance in the trading seen so far today.

EUR and dollar bloc higher

ssmith — Thu, 11 Apr 2013 10:34:54 +0000

EURUSD through y'days highs, up 60 pips during European session to high of 1.3132. AUD and NZD outperforming, 1.0571 and 0.8664 respectively. Feeling is of a market more driven by trends and flow, rather than specific news.

(Early) Fed minutes show growing divisions on FOMC cttee

ssmith — Wed, 10 Apr 2013 13:07:49 +0000

USD firmer after early release of FOMC minutes showed growing divisions on cttee, some see halt to QE by yr end, tapering around mid-year. EURUSD 1.3070

Kuroda curtails yen bears

ssmith — Wed, 10 Apr 2013 12:09:46 +0000

USDJPY down 35 pips to 99.20 as BoJ Governor Kuroda says monetary policy not aimed at yen rate, measures enough for now. EURJPY at 129.80. In context of the measures taken last week, the comments are not that contradictory. Remember the measures announced surpassed all expectations, the yen move reflecting this.

EUR strengthening in early European trade

ssmith — Wed, 10 Apr 2013 08:03:02 +0000

EUR moving higher in early European trade, EURJPY through 130 (high 130.42), with EURUSD above 1.31 (high 1.3116). European stocks are in buoyant mood, which is proving supportive.

GBP seeing mixed data

ssmith — Tue, 09 Apr 2013 08:34:31 +0000

GBPUSD only slightly firmer at 1.5290 after stronger than expected production data (1.0% MoM) gain, offset by disappointing trade data (GBP 3.6B deficit). Once again, the trade data undermines the notion of a rebalancing of the UK economy.

EURUSD higher on jobs report

ssmith — Fri, 05 Apr 2013 12:41:01 +0000

EURUSD has moved back above the 1.30 level in the wake of the US jobs report, which showed a modest 88k gain in headline payrolls, vs expectations for a 90k gain. As always, the story is mixed. Note that the prior two months saw 61k of upward revisions and the unemployment rate moved lower to 7.6% (was expected to remain steady at 7.7%). The data follows a period of upside surprises, with four of the past five months surprising to the upside.

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Waiting for payrolls

ssmith — Fri, 05 Apr 2013 10:52:21 +0000

After the volatility of the past 24 hours, markets are content to hold fire ahead of the US employment report at 12:30 GMT. The actions of the Bank of Japan yesterday are likely to further enhance the change in dollar dynamics of recent months that we were talking about in our Daily Brief (see Trading Payrolls).

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EUR lower on ECB press conference

ssmith — Thu, 04 Apr 2013 12:47:54 +0000

EURUSD down 40 pips to 1.2785 as ECB less bullish on economy and says rates accommodative "as long as needed", which is new condition.

EUR a touch higher after ECB

ssmith — Thu, 04 Apr 2013 11:48:43 +0000

The steady rate decision from ECB nudging EURUSD a touch higher initially to 1.2820, but has since moved back to near pre-decision levels. Far more interest in press conference in 40 minutes...