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By XE Market Analysis October 9, 2013 3:09 am
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    XE Market Analysis: Europe - Oct 09, 2013

    It was another rangebound session for the G10 FX. However, the dollar chopped as sentiment got a boost after U.S. administration officials said Yellen will be nominated as the next Fed Chair later today. The news offset the persisting stalemate in D.C., which showed no signs of breaking as the partial government shutdown extended into the ninth day. USD-JPY bounced out of 96.80 to 97.40 on Yellen, while EUR-USD retested levels over 1.3600 early on and then sank to 1.3565 on USD-JPY guidance. AUD-USD consolidated near 0.9450 for the most part after options capped ahead of 0.9500 on Tuesday and there was a disappointing 2.1% m/m drop in Australia consumer confidence to digest. The BoJ minutes revealed that policy is likely to remain on hold for the foreseeable future. Meanwhile, the China Securities Journal cited industry sources that said China will outline ways to boost growth at the third plenary session of the CPC Central Committee, which will include reforms and infrastructure measures. There were also reports that China new loans grew a larger than expected CNY 840 bln, which is a positive for the economy.

    [EUR, USD]
    EUR-USD made a run on levels over 1.3600 initially on Yellen, but ran into good Asian account offers. USD-JPY's rebound out of 96.80 to 97.40 also provided negative guidance for EUR-USD and it headed back to the 1.3565 region. The EUR should continue to trade a relatively narrow range while the U.S. debt impasse continues, though on the downside now there is decent support building in and around the 1.3540-50 region. On the topside, offers are quite heavy towards 1.3630 as outstanding 1.3650 barriers encourage range players and defensive selling.

    [USD, JPY]
    USD-JPY started the session under pressure near 96.80 after a weak Wall Street close amid the debt stalemate in Washington. Japanese buyers were prevalent in the 96.70-80 area, which put a floor in place ahead of large outstanding barriers at 96.50. News of the Yellen nomination for Fed Chair boosted sentiment and this helped USD-JPY back through 97.00 to 97.43 highs. On the way up there was offshore account selling and unless there is a breakthrough in U.S. debt negotiations selling into strength will continue in the near-term.

    [GBP, USD]
    GBP is stable and largely unchanged from yesterday's European levels, with Cable near 1.6050 and EUR-GBP close to 0.8440. There was conjecture on Tuesday that GBP may be benefiting from U.S. uncertainty as short term funds look for a safe bet as the U.S. debt ceiling impasse drags on. Other potentially supportive news is the Royal Mail's IPO. According to recent estimates from city insiders, there has been total investors orders in excess of GBP 30 bln and it will be sold at the top-end of the indicative price range of 260-330p a share when pricing is announced on Friday.

    [USD, CHF]
    The CHF is easier in early Europe, leaving EUR-CHF close to 1.2300 and USD-CHF at 0.9070. The downturn in the CHF came amid USD-CHF firmness as risk appetite improved on news that Yellen will be officially nominated as the next Fed Chair later today. There are also concerns that the impasse in the U.S. could be fueling a fear of a shortage of dollars and this has boosted the USD forward rate in recent sessions. Meanwhile, SNB's Jordan spoke after yesterday's European close, but did not offer anything new and reiterated the importance of the CHF cap and said it was right for the foreseeable future.

    [USD, CAD]
    USD-CAD is on the front foot after it raced up to 1.0370 during the North American afternoon session. A rise in risk aversion weighed on the CAD$ and dollar offers between 1.0340 and 1.0360 were cleared away in thin trade. USD-CAD maintained a firm tone overnight, with the USD underpinned after the Yellen news, while fears of a dollar shortage also appeared to be driving short term flows. The 1.0400 level is going to be a near-term pivot point and stops are likely higher up.

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