2013-03-22 19:39 (UTC)
XE Market Analysis
The dollar weakened in N.Y. trade on Friday, taking EUR-USD to highs of 1.3010 following positive noises from Cyprus. Equities managed moderate gains, which weighed on the greenback somewhat. The Cyprus situation remained fluid at the time of writing, however, as a member of the Cyprus parliament, Neofytou, said that a deal will be struck by the day's end. This said, there was also a report that proposed changes to bank bills were rejected by the ECB. The U.S. economic calendar was empty, and focus remained on the latest EU crisis and equity markets. Sterling tumbled briefly on the back of Fitch placing the U.K. rating on negative watch, while USD-JPY suffered from continued unwinding of the BoJ easing trade. Next week bring month, quarter, and Japan's fiscal year end, so market activity could be on the rise as we look ahead.[EUR, USD]
EUR-USD perked up on the back of reports of potential progress in Cyprus, where talk of "a result" today made the rounds. The euro moved to new intra day highs of 1.3010, after basing in N.Y. earlier near 1.2935. Sellers emerged quickly over the figure however, and after some chip into the London close, the pairing settled in near 1.2980. The weekend could bring some surprises from Cyprus, though euro bets were apparently favored to some sort of resolution.[USD, JPY]
USD-JPY's recovery was capped just over 95.00 after the rebound out of 94.20 ran its course. Tokyo backed offers that were left in late Asia held the topside. A cross move up from 122.80 to 123.45 on positive Cyprus headlines kept it within close proximity to 95.00, but it later ebbed under 94.40 as market participants digested the latest Cyprus headlines. Price action remained choppy into the London close, as European market participants closed books into the weekend.[GBP, USD]
Fitch placed the U.K. on rating watch negative, confirming the "heightened probability of a downgrade in the UK rating near-term." This reflected the latest economic and fiscal forecasts, though overall the UK creditworthiness is underpinned by its high income, diversified and flexible economy. Cable slid in the aftermath of the Fitch U.K. downgrade threat, falling to 1.5290 from near 1.5250. The pairing quickly bounced back over 1.5250 in very thin Friday N.Y. trade, as the news was not all that surprising.[USD, CHF]
EUR-CHF traded off EUR-USD movement. After testing 1.2200 in early trade it met a decent local name bid and headed back over 1.2225, which came in tandem with EUR-USD's move from 1.2890 to 1.3000. We think SNB are concerned over a pick up swissy inflows on any potential fallout from Cyprus. SNB's Moser reminded markets recently that negative interest rates is still an option and also said yesterday that current policy geared towards securing the 1.2000 cap would remain for the foreseeable future. The market should remain in a holding pattern until the issue over Cyprus is resolved and the EUR-CHF may be limited from 1.2230 to 1.2250 amid good standing offers.[USD, CAD]
USD-CAD eased to session lows under 1.0240 early on, as risk taking perked up slightly. Ranges overnight were narrow though, and more of the same was seen into the weekend. Light intra day stops were noted at 1.0230, and were eventually tripped up, though bidding interest picked up again ahead of 1.0200, as the pairing put in 1.0220 lows before steadying. On the other side of the market, offers start at 1.0265.