2013-05-31 16:12 (UTC)
XE Market Analysis
Better U.S. data came to the dollar's rescue on Friday, as Chicago May ISM readings and the U. of Michigan sentiment print both handily beat expectations. The greenback moved broadly higher following the data, as did equities and Treasury yields. After opening near 1.3015, EUR-USD slipped to lows of 1.2945, before stabilizing over 1.2950. USD-JPY which touched session lows of 100.22 into the data, made its way toward 101.20 into the London close. USD-CAD briefly tested 1.0300 after better Canadian GDP numbers, though soft commodity prices and a generally firmer greenback resulted in month-end short covering up to 1.0370.[EUR, USD]
EUR-USD opened the N.Y. session near 1.3015, and made its way to lows near 1.2945 into the London close before finding its footing. Better U.S. data weighed on the pairing, though firmer EU CPI data released earlier likely limited losses by diminishing the chances for an ECB rate cut next week. Intra day short covering took the euro off its lows into the London close, and dealings dried up from there, with month and week end at hand.[USD, JPY]
USD-JPY snapped back over 100.50 early on as option related demand went through. Very large expiries rolled off at 100.50 and 100.80. The better U.S. data, along with firmer Treasury yields helped the pairing in subsequent dealings, taking it over 101.20 by mid-morning. These gains came partly undone however, and USD-JPY did look vulnerable overall. A close under 101.00 could bring more selling to bear when the new month and week kick off on Monday.[GBP, USD]
Cable held up as support emerged under 1.5200 into the N.Y. open, though later succumbed to broad dollar buying interest, taking it under 1.5150 into the London close. EUR-GBP's correction from 0.8600 raised further speculation that sovereigns see value repositioning at current levels, though it also got traction from EUR-USD's correction. Comments from ex-BoE MPC member Posen were mildly supportive. He said the BoE is unlikely to talk down sterling in the near future. He thought Carney's arrival should not a herald a radical program of policies, adding he will not have the tools to weaken the pound. The comments contrast with PIMCO's Amey, who tipped a Cable fall to 1.3700 with Carney at the helm. Cable has met decent support towards 1.5000 at frequent intervals since the BoE were more vocal about the inflationary consequences of a weak pound in March.[USD, CHF]
EUR-CHF regained its poise, climbing out of the 1.2380 area and pushing back to 1.2440. However, apart from local names supporting under 1.2400 the large majority of flows via the CHF have gone through USD-CHF, leaving a default bid under the cross. The dollar pairing reversed after the second failure to unlock 0.9500 after the early U.S. releases and extended from 0.9565 to 0.9595 after the firm U.S. data round. The swissy doesn't look like it has the legs to sustain lower levels with low quality names behind the interest. Real money have effectively kept the CHF elevated for several sessions and were backed up by positive data from Switzerland this week.[USD, CAD]
USD-CAD slipped to just over 1.0300 from 1.0330 following the better Canadian GDP print, though downside was tempered by reports of good domestic bids into the figure. More buying interest is seen down to 1.0270, so CAD bulls had a tough time through the remainder of the session. The pairing later ran up over 1.0375 on the back of weaker commodity prices, a generally firmer USD, and month end short covering.