2012-12-13 20:18 (UTC)
XE Market Analysis
The dollar traded with a slightly softer bias in N.Y. morning trade on Thursday. Risk appetite was fairly neutral, allowing the greenback to fade some. The economic calendar was heavy at the open, but the dollar barely moved after the mix of data, where jobless claims were lower than expected, retail sales a touch softer, and PPI cooler on the headline and core outcomes than anticipated. EUR-USD touched 1.3085 from 1.3070, where it ran into reported option backed sellers. USD-JPY meanwhile was stagnant near 83.45. Trade was quiet, and with the data out of the way, focus shifted to the risk backdrop, where back and forth between the Dems and GOP on the fiscal cliff scared off investors, resulting in weaker equities and a firmer greenback through the afternoon.[EUR, USD]
The EUR consolidated at high levels near 1.3100 in the wake of the Fed's announcement yesterday (to adopt a fully open-ended ultra accommodative policy stance), and ran out of room into the 1.3100 region in morning trade in N.Y. Some London selling was seen into their close, while as Wall Street turned negative, long EUR positions were cut down in N.Y. as well. The pairing slipped back under 1.3060 briefly, before steadying around 1.3075 into the close.[USD, JPY]
After USD-JPY raced higher in the wake of the Fed decision on Wednesday amid considerable volume, the pairing steadied in N.Y. dealings. Both Japanese accounts and offshore names were evident in the upswing, though we note exporter offers, as well as more outstanding knock out triggers from 83.70 to 84.00. The JPY crosses were buoyed by appetite for yield, along with M&A flows and samurai issuance, which put a strong bid up EUR-JPY. USD-JPY trend watchers will focus on 2012 highs at 84.20, which is likely to be vulnerable as we approach the weekend. Note, that risk reversal skew for yen put are at multi year highs, along with speculative shorts, underlining the extent of market sentiment. Sources also reported more hedge fund demand for yen puts in recent sessions with barriers from 85.50 to 86.00.[GBP, USD]
U.K. December CBI industrial trends came in above expectations at -12 for the total orders headline, up from -21 in November. The outcome is above our forecast for -17 and the Reuters median for -16, and its the first time the gauge has been above its long-term average of -17 in three months (the long-term average is negative as the survey history has covered a period of structural decline in the industrial sector).Sterling reacted positively to the data, though took a nose dive after S&P place the U.K. on negative ratings watch. Cable dropped from 1.6125 to 1.6085. There has been U.K. downgrade talk this week, so the action had limited limited impact. Indeed, cable reclaimed the 1.6100 handle in late dealings, closing around 1.6110.[USD, CHF]
USD-CHF moved to 0.9240 in the wake of the Fed decision. The dollar fall was speculative as short term accounts keyed off an extended risk-rally, though the U.S. market reaction was more restrained. The impact on EUR-CHF was limited. It maintains a stable tone around 1.2120 ahead of the SNB policy announcement. Swissy shorts are positioning for EUR-CHF upside due to recent policy speculation after the move by UBS and CS to charge on CHF deposits. However, it is widely expected to maintain the current policy stance, which includes the EUR-CHF lower limit at 1.2000. Profit taking could send it back towards recent lows between 1.2075 and 1.2060 on a steady hand, while resistance is noted from 1.2140 and at 1.2175.[USD, CAD]
USD-CAD stayed above its post FOMC lows of 0.9827 overnight, though continued to run into selling interest on modest upticks over 0.9840 in London trade. Corporate buyers were seen lined up from 0.9800, and stops at 0.9825-20 could see the figure targeted should they be triggered. The pairing later found support into 0.9825, moving over 0.9840 in light trade by late morning. Risk levels were fairly neutral through the morning, though eased back with equities in afternoon trade, as markets fretted over the back and forth from U.S. congressional leaders on the "cliff". Light stops were tripped over 0.9850, above the Asian peak, though follow through was limited to 0.9856.