2013-04-24 06:40 (UTC)
XE Market Analysis
Movement in the FX market was contained despite broad based stock market gains in the last 24 hours as central bank stimulus hopes picked up after weak data from China and Europe. The dollar was a touch easier compared with Tuesday's highs, but after yesterday's eurozone PMI weakness expectations of an ECB rate cut kept upside movement limited just over 1.3000. Similarly, Cable was capped into 1.5250 and AUD dropped from 1.0275 to 1.0230 after a weaker than expected Australia CPI release. NZD spiked from 0.8400 to 0.8460 after the RBNZ left rates unchanged at 2.5% as expected. USD-JPY made an early push higher after yesterday's strong demand from macro funds and it reached 99.70 and then pulled back to 99.20 during the Asian afternoon.[EUR, USD]
EUR-USD started the session close to 1.3300 versus Tuesday's 1.2973 lows. It maintained a narrow range throughout and struggled to sustain movement over 1.3000 following yesterday's eurozone PMI weakness, which significantly increased expectations of an ECB rate cut. Selling into strength is expected to continue in the near-term. Interim support is noted at 1.2970 and 1.2950, while the 200-dma is noted at 1.2935-40, which could be a potential target for intra-day accounts.[USD, JPY]
USD-JPY added to Tuesday's gains as short term accounts made an early topside test. It rose out of 99.30 and reached 99.75, with demand tipped from both U.S. and Japanese names, which were also active in N.Y. trade. Exporters and options interest weighed and it headed back to 99.20. The lack of topside progress in USD-JPY also weighed on the crosses, which saw EUR-JPY chop down from 129.70 to just below 129.00 before prices steadied and there were similar moves in GBP-JPY and AUD-JPY. The latter turned away from 102.40 to 101.45 as softer than expected Australia CPI weighed.[GBP, USD]
Cable is trading on a stable footing close to 1.5250. The overnight rally in stocks is providing a modicum of support, although after yesterday's poor U.K. data upside movement is still limited towards the 1.5300 region. There was a brief dip after the BoE announced an extension to the Funding for Lending Scheme ahead of the European open, which was widely expected. It will now run until January 2015 and there will be incentives to boost lending to SMEs in 2015. For every GBP 1 of net lending banks will be able to draw GBP 5 from the scheme in the extension period and for every GBP 1 of net lending for the remainder of 2013 it will be worth GBP 10 of initial borrowing allowance in 2014. Lending will also be expanded to financial leasing corporations and factoring corporations, as well as certain mortage/credit corporations.[USD, CHF]
EUR-CHF traded within a few pips of 1.2300 in Asia following Tuesday's strong rally, which lifted it over 1.2255 for the first time since the middle of March on speculative flows. The cross benefited from a rise in risk appetite and also increasing expectations of more central bank stimulus. ECB rate cut expectations rose a notch after weak eurozone PMI data on Tuesdsay, while the BoJ are also expected to reiterate its commitment to the 2% CPI target on Friday. London traders also cited rumors that the SNB could raise the floor on EUR-CHF to 1.2500 from 1.2000 currently, which has kept it elevated since today's open.[USD, CAD]
USD-CAD continues to trade very tight ranges. A pick up in risk appetite weighed a touch in Asia and it drifted back to 1.0255 from 1.0270. Overall, there is no appetite to break the range. The technical backdrop is supportive, but the churn in global risk appetite is driving movement at the moment. Bids remain from 1.0240 to 1.0230 and then front of 1.0200, while offers are seen from 1.0280 and into 1.0300. Stops are reportedly fairly heavy in size above the figure.