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By XE Market Analysis October 9, 2014 2:07 pm
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    XE Market Analysis: Asia - Oct 09, 2014

    The dollar reversed course in N.Y. trade on Thursday, clawing back some of its losses posted after the FOMC minutes on Wednesday. After EUR-USD stalled out over 1.2790 in London, the pairing fell back to 1.2665 lows. USD-JPY meanwhile, which based at 107.53 in early trade, made its way back toward 108.20. Cable fell over 100 points to under 1.6120, while USD-CAD rocketed over 1.1170 from lows near 1.1090 on the back of risk off conditions, and another slide in oil prices. Wall Street wiped out the sharp gains it posted on Wednesday, as yields fell back in sympathy. On the economic front, weekly jobless claims were a bit lower than expected, while wholesale data missed the mark.

    [EUR, USD]
    EUR-USD matched intra day lows of 1.2719 early in the session, before backing up over 1.2730 again. The FX market remained tentative following Wednesday's major short squeeze, and it appears for now at least, dollar bulls are a bit gun-shy. Given the growth and policy divergences however, the buck is liable to pick up versus the euro and yen in particular over the coming sessions. EUR-USD later eased into intra day lows of 1.2686 as Draghi headlines hit the wires, though with nothing terribly new from the ECB chief, the modest move could have been related to London position squaring. The pairing later based at 1.2664, despite the meltdown on Wall Street, and softer U.S. yields.

    [USD, JPY]
    USD-JPY struggled its way up to 108.18 highs, from 107.54 lows early in the session. Short covering following Wednesday's sharp slide was a factor under108.00 through the morning, though as risk-off returned in a big way, the pairing succumbed quickly, and headed back under 107.80. Stocks sold off heavily, and yields followed suit by moving lower, both yen-positive developments.

    [GBP, USD]
    The BoE's MPC left policy on hold, as was widely anticipated. This leaves the repo rate at 0.5% and the QE total at GBP 375 bln. There is no statement (aside from the usual basic announcement details), as normal following unchanged decisions, rendering the announcement a non-event for markets. The minutes will be published two weeks hence, on Oct-22. There was little sterling reaction, though as the N.Y. session developed, the dollar picked up a bid, despite the sharp Wall Street sell off, and lower U.S. yields. Cable eventually fell under 1.6110, down from early highs near 1.6225.

    [USD, CHF]
    EUR-CHF is back above 1.2100 after SNB's Jorden said last week that there are additional measures that the central bank could use to enforce the EUR-CHF limit peg at 1.2000. This has put the major-trend low of 1.2044 out of the picture for now. The SNB will find defending the 1.2000 cap a tougher proposition in the context of broad, fundamentally-driven euro weakness than it would be in the case of specific franc outperformance.

    [USD, CAD]
    USD-CAD peaked at 1.1126 in early trade, after touching 1.1085 lows in London morning trade. Later, the pairing touched 1.1172, up from session lows of 1.1090, as equities melted down, and as oil prices look to have no bottom in sight. Wednesday's post FOM minutes stock rally was more than unwound, while NYMEX crude touched trend lows of $85.60. These factors weighed on the CAD, with the next risk event coming Friday in the form of the September Canadian employment report. Wednesday's post-minutes USD wash-out likely resulted in a much more neutrally positioned market going into the jobs report, as a good number of USD-CAD longs were squeezed out on the move from 1.1200 down under 1.1100.

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