2013-02-27 20:23 (UTC)
XE Market Analysis
FX trade was relatively light through much of the N.Y. session on Wednesday, though a rebound in risk taking ultimately weighed on the dollar and the yen. Wall Street found a footing after Bernanke's second day of questioning in D.C., perhaps convinced stimulus is here to stay. A weak durables report offset strong pending home sales data, though had little immediate impact on the dollar. EUR-USD spent most of its time between 1.3125 and 1.3080, managing to move over 1.2130 into the close. USD-JPY meandered higher through the morning, eventually taking out 92.00 stops as the result of EUR-JPY buying. The CAD and AUD improved with the better risk backdrop, while cable settled in around 1.5125.[EUR, USD]
The ECB's Draghi said monetary policy remains accommodative and we are "far from having an exit in mind" while next year's inflation is seen "significantly lower than 2%." EUR-USD gave back the 1.3100 handle following the comments, with light intra day selling seen at the figure. As Wall Street gains continued to build though, we suspect downside was limited to 1.3083. A bout of EUR-JPY buying forced EUR-USD to session highs over 1.3130 into the close. The European economic calendar is busy on Thursday, with EU inflation, German retail sales and Spanish GDP amongst the releases, so positions may be consolidated through the overnight session.[USD, JPY]
Jiji press reported that Kuroda will be formally nominated for the BoJ Governor post on Thursday. There had been speculation all week that Kuroda, the head of the Asian Development Bank, would get the nod. Markets had been thinking though, that Kuroda was a shoe-in for the Governor position as the DPJ have said they wouldn't stand in the way. USD-JPY had been ticking higher through the morning, remaining inside of intra day ranges until late in this session, when EUR-JPY short covering stepped in on the break above the earlier London and N.Y. highs at 120.45-50. Cross buyers came out of the woodwork, resulting in a pop to near 1.21.50. Ahead of the likely appointment of Kuroda as BoJ governor on Thursday, short positions were being pared. USD-JPY meanwhile took out 92.00 stops on its way to 92.40.[GBP, USD]
Cable continued its grind higher to trade near 1.5190. It was on the rise from the European open on good order flow under 1.5100 and M&A news fueled long position building from short term accounts. News that Vodafone may delay its approach for Kabel Deutschland triggered some unwinding of speculative short positions. It was good for a 50 pip move in EUR-GBP from 0.8675 to 0.8625. There was also added benefit from U.K. Q4 GDP, which was revised up to +0.3% y/y from a flat reading previously. Cable's rally ran out of stean into the London close however, taking it back toward 1.5125, where it steadied in light afternoon trade.[USD, CHF]
SNB's Jordan reiterated the SNB policy stance, stating that the CHF is still overvalued at 1.2000 versus the EUR and the peg will last as long as necessary. Jordan did not see a full return of the euro crisis and rejected talk of a currency war in remarks similar to those made at the recent G20 meeting. EUR-CHF dipped from 1.2190 to 1.2175, yet was related to EUR-USD selling rather than Jordan. Later in the session, the cross recovered over 1.2225as EUR-USD recovered over 1.3130.[USD, CAD]
USD-CAD was steady over 1.0250 overnight, pulling back from Tuesday's trend high over 1.0300. The pairing was on the rise early, as risk levels were fairly subdued, though as equities rallied, USD-CAD turned back into the 1.0250 region. This level provided good support. moving to 1.0245 lows before inching back over 1.0250. Corporate interest was noted at the lows, and is expected to keep downside contained for now.