Home > XE Currency Blog > XE Market Analysis: Europe - Aug 27, 2013

AD

XE Currency Blog

Topics6752 Posts6797
By XE Market Analysis August 27, 2013 2:38 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4676
    XE Market Analysis: Europe - Aug 27, 2013

    The USD, JPY and CHF were supported overnight as the situation in Syria weighed on risk appetite. The potential for outside intervention rose after U.S. Secretary of State Kerry said on Monday that the U.S. and its allies believe that chemical weapons were used in an attack last week. Meanwhile, emerging Asia FX came under pressure with stocks on an uncertain Fed outlook despite yesterday's slump in July durable goods orders. This was compounded by a CNBC report, which cited an Obama source that said Summers will be named as Fed chief soon. Elsewhere, China's vice finance minister ruled out the need for stimulus as recent data showed that targeted stimulus had already put a floor under the slowdown.

    [EUR, USD]
    EUR-USD was capped ahead of 1.3400, while EUR-JPY's fall from just under 132.00 to 131.25 also weighed. It ended the session largely unchanged around 1.3370 after failing to trade higher than 1.3390. The EUR will take its lead in Europe from German Ifo data. Overall, it has struggled to sustain a move over 1.3400 of late due to Asian sovereign activity, which has picked up due to local market intervention. There is also uncertainty surrounding the Fed outlook, although we still think the Fed will taper policy despite a couple of recent data misses. The U.S. NFP data on September 6 is still going to be key in this regard.

    [USD, JPY]
    USD-JPY was weighed by a reduction in speculative positioning amid the risk-off tone. Geo-political risk and yesterday's drop in durable goods orders forced USD-JPY down from the 98.50 region to 98.05. The sell-off came mostly from short term funds and was absorbed to a degree by importers and talk of option bids. Pressure on emerging Asia forced AUD-JPY from 89.00 to just under 88.00 and NZD-JPY fell from 77.40 to 76.50. In domestic news, the Nikkei reported that PM Abe backed talks on corporate tax in order to offset set next year's planned sales tax hike.

    [GBP, USD]
    Cable is trading close to 1.5650 as London trader return from the long weekend. Trade was practically non-existent today in London's absence, and in N.Y. dealings, cable largely mimicked EUR-USD's prices action, ranging between 1.5610, and 1.5560. BoE Deputy Governor Bean defended the forward guidance ahead of tomorrow's testimony from BoE Governor Carney. Bean said that he has been a bit surprised by the market reaction to guidance. He said that guidance is valuable when recovery is gathering pace, that the BoE is giving a clear signal that a tightening is not imminent, and that the 7% unemployment target is sensible. We think Carney will also echo this view and maintain a tough stance on policy despite the reservations reflected in market prices.

    [USD, CHF]
    The CHF extended its period of consolidation on Monday. However, the risk-off tone overnight forced EUR-CHF from 1.2350 back towards 1.2310, while USD-CHF has pulled back from 0.9240 to the 0.9210 area. Geopolitical risk may dominate in the coming sessions, though recently EUR-CHF has benefited from good local name support under 1.2300. USD-CHF has also stabilised since it pulled back from the 0.9300 region last week.

    [USD, CAD]
    USD-CAD is still holding on a firm tone above the 1.0500 region. It found support into 1.0500 on Monday, after falling from session highs over 1.0530. Activity was light overall, though corporate buyers were present from the open. Overnight, the downturn in equity markets carried it back to the 1.0530 region. Stops are building either side of current levels. Short term longs placed stops under 1.0490 and over 1.0550 there is more long-term interest.

    Paste link in email or IM