2013-04-02 11:00 (UTC)
XE Market Analysis
Risk appetite improved in Europe, but movement in the FX space was restrained ahead of key central bank policy meetings later this week. Equity markets benefited from an upward revision in eurozone manufacturing PMI and firmer U.K. manufacturing PMI, though both readings were still well below the 50.00 level and weighed on the EUR and GBP tone. Sentiment surrounding Cyprus eased after the authorities eased the limit on daily transactions to EUR 25 k per account and raised the limit on cheque payments to EUR 9k per month. Meanwhile, USD-JPY rebounded back over 93.00 on good Asian support after it bottomed out around 92.50 in Asia. Elsewhere, AUD held firm ahead of 1.0450 after RBA left rates unchanged at 3% as expected.[EUR, USD]
EUR-USD headed to lows under 1.2830 after overnight lows at 1.2840 gave way following the eurozone PMI releases. The headline reading was revised up due to upward revisions in the French and German releases, but Spanish and Italian PMIs dropped. The EUR is likely to struggle in the near-term as the numbers underlined the weak economic conditions in the eurozone and after the recent Cyprus turmoil. EUR-USD bias is on 1.2800, where bids were noted during the overnight session, but a rally via the German DAX offset some of the heaviness as the European morning drew to a close.[USD, JPY]
USD-JPY is in a holding pattern ahead of the two-day BoJ policy meeting, which gets underway on Wednesday. After registering 92.56 lows in Asia it carved out a healthy rally. Good Japanese support put a floor in place since the European open and there was good interest from an Asian central bank, which took it back towards Asian opening levels around 93.30-40. Ahead of tomorrow's two-day BoJ meeting, BoJ Governor Kuroda has promised to take bold steps to ensure that it meets the 2% CPI target. However, there is a risk that BoJ may not be as aggressive as hoped and one of the factors that supported JPY in recent sessions. Large Japanese manufacturers see USD-JPY at an average of 85.20-25 during the new fiscal year.[GBP, USD]
GBP hit session lows after U.K. manufacturing PMI came in at 48.3, which was weaker than forecast, but above February's 47.9 release. Cable lost the 1.5200 handle after it traded around 1.5235 ahead of the release. There was temporary support from rumors of a better outturn, but bias was with the downside since it fell short of 1.5275 resistance in Asia and after a leading U.S. name released a sell recommendation. Sell stops through 1.5200 added momentum on the way to 1.5182 lows, where European name support was tipped in early trade. EUR-GBP rebounded out of an intra-day lows of 0.8425 to trade back over 0.8450 following the move to six-week lows of 0.8416 at the start of the week.[USD, CHF]
EUR-CHF was relatively stable around 1.2150 ahead of the N.Y. open after trading in lockstep with EUR-USD. There was no reaction from Swiss manufacturing PMI data, which came in much weaker than expected at 48.3 from 50.8 previously. For the most part, EUR-CHF has been weighed by eurozone uncertainty, which increased after the Cyprus debacle and on negative eurozone economic fundamentals. A large European name triggered a stop hunt through 1.2150 to force lows under 1.2140. However, it steadied after EUR-USD found support from 1.2825 to trade back into 1.2850 by late on in the European morning.[USD, CAD]
USD-CAD broke lower after support at 1.0150 gave way. The pick up in Europe equity markets was a positive lead for CAD$, along with Nymex crude's stable tone around $97 bbl. Since USD-CAD traded under 1.0200 bias was with the downside and today's move into 1.0125 offers scope for a move on the 1.0100 intra-day. Selling pressure is likely into 1.0150 and 1.0170 in the near-term.