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By XE Market Analysis August 15, 2013 2:22 am
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    XE Market Analysis: Europe - Aug 15, 2013

    The dollar maintained a slightly softer tone after it eased in N.Y. trade on Wednesday, as very tame PPI data took Treasury yields a bit lower. USD-JPY losses stood out in Asia as summer doldrums kept its grip on markets. The dollar pairing fell to 97.70 as Japanese policy makers ruled out a corporate tax cut. Cabinet Secretary Suga said there was no truth to the recent report and Finance Minister Aso did not think it would be effective as only 30% of firms pay the tax. He did say that tax breaks on corporate capital spending could be considered. AUD moved up to 0.9180 on USD moves, which helped EUR over 1.3300. Today's U.S. calendar is packed, with CPI, jobless claims, the Empire State index, the Philly Fed index, industrial production, TIC flow data, and the NAHB housing market index all on tap. In Europe, U.K. retail sales is the highlight and Cable is consolidating a move over 1.5500.

    [EUR, USD]
    EUR-USD triggered stops over 1.3300 as USD-JPY losses influenced in Asia. However, Asian supply dampened the upturn and it turned away from 1.3310 back to 1.3285. The daily chart is still capping, but so far appetite to add significantly to dollar longs has been lacking in typical summer trading conditions. This could change after today's U.S. releases and stops below 1.3230 and 1.3200 could attract.

    [USD, JPY]
    USD-JPY was weighed by Nikkei losses as Japanese policy makers ruled out a corporate tax cut. After an early push under 98.00 to 97.75 it moved up to 98.30 highs after the Japanese government said the economy was picking up and showing signs of a sustained recovery. It upgraded its view on the job market and said deflation was ending. However, USD-JPY's recovery was limited and it headed to session lows after Suga and Aso played down recent reports on measures to counter the anticipated rise in the sales tax next year. USD-JPY traded into the 97.60 and then steadied around 97.70 at the European open as Japanese buyers emerged ahead of 97.50.

    [GBP, USD]
    Cable consolidated Wednesday's move back over 1.5500. Yesterday's BoE minutes and a pick up in U.K. employment fueled fresh fund demand. From a fundamental perspective real money see good long-term value for sterling in the long term. Economic data continues to beat expectations and activity should continue to pick up while the BoE maintains the current policy stance. The focus for today will come from U.K. retail sales, which is expected to post another rise as recent survey data from the sector improved.

    [USD, CHF]
    EUR-CHF is trading just under 1.2400 as profit taking went through into yesterday's London close. EUR-CHF had held on to 1.2400 since early Europe after it raced up from 1.2370 to 1.2425 on renewed fund interest to sell the CHF. The move lower in EUR-CHF was a function of USD-CHF's pullback from 0.9375 to 0.9315 and it is more likely to guide action in the coming sessions. A series of positive closes gave it momentum above the 200-dma at 0.9355 yesterday and after a small correction we still see it higher.

    [USD, CAD]
    USD-CAD eased to the 1.0315 area after it topped out at 1.0370 during yesterday's European morning. The softer U.S. PPI outcome was the main driver in North American trade, with gold prices flat and oil a touch weaker, neither having much impact on the CAD. Standing bids were noted down to 1.0300, with stops underneath the figure. Overall, activity remained subdued, and traders continue to see solid support into the 1.0300 level, while offers are still congested from 1.0370 to 1.0400.

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