2013-06-03 06:26 (UTC)
XE Market Analysis
It was a quiet start to the month as larger accounts were sidelined ahead of key event risks and data due over the week. Friday's positive U.S. data and month end trade saw U.S. stocks close on a weaker footing, but better than expected official China manufacturing data offset some of the fall out in Asia. However, the HSBC reading fell to 49.2 from 49.6 previously, which left an uncertain backdrop for China. The USD was slightly easier on light commercial flows from sovereign names, along with USD-JPY's heavier tone around the 100.50 region. The focus in Europe will come from a rash of PMI data, which will set the tone ahead of key central bank meetings later this week.[EUR, USD]
EUR-USD started the session close to 1.3000 after it rebounded out of 1.2940 on Friday. It traded a narrow ranges either side of this 1.30 pivot. EUR-JPY was a supportive lead and there was still appetite to buy EUR-AUD on dips, along with Asian sovereign dollar supply. EUR-USD may continue to consolidate ahead of the ECB meeting later this week. They are widely expected to remain on hold and EUR short covering is more likely after the lack of progress on a 1.28 handle early last week.[USD, JPY]
USD-JPY was heavier after it started the session under 101.00. EUR-JPY demand out of 130.45 to 131.00 helped USD-JPY up from 100.35 to the 100.70 region, but there was no further demand due to the Nikkei's weak tone. USD-JPY looked vulnerable on the downside on Friday and a 100.00 test looks likely in due course. Option related demand and importer bids are noted into this region, but stops are reportedly on the large side through this level and 99.90.[GBP, USD]
Cable is supported early on as demand emerged under 1.5150 during Friday's N.Y. afternoon, leaving it close to 1.5200 at the close. Dollar supply went through in Asia, which lifted it to 1.5230 and just a short distance from recent highs around 1.5240. Offers are expected to emerge on upticks and there are a build up of orders ahead of 1.5300 buy stops. BoE Governor King told the BBC ahead of his last MPC meeting that the U.K. economy was still not growing fast enough. The comments did not offer much for the market, but are likely to reinforce expectations that an extended period of easy policy will remain when Carney takes over next month.[USD, CHF]
EUR-CHF is trading on a firm footing after it regained its poise Friday, climbing out of the 1.2380 area and pushing back over 1.2450. 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. SNB's Jordan said on the weekend that the CHF remains strong despite the recent moves, which will reinforce expectations that policy will remain easy when the SNB meet on June-21. However, the pick up in domestic data is likely to rule out any further measures to weaken the CHF further. EUR-CHF should remain a buy on dips, with near-term demand likely now into 1.2400-10. Offers are noted from 1.2480 to 1.2500.[USD, CAD]
USD-CAD is on a stable footing following Friday's short covering rally. Ranges were tight overnight around 1.0370. The pair looks as if it will maintain the range trading bias in the near-term. Recent downside tests have been limited by good order flow and the more mixed risk backdrop, which has generally weighed on commodities and capped the upside in stocks. However, USD-CAD moves into 1.0400 and above are a decent hedging opportunity for corporates and this has generally dampened the potential for extended topside moves.