2013-04-23 19:59 (UTC)
XE Market Analysis
The morning session was fairly quiet in FX Land on Tuesday, with the dollar and yen losing ground on the back of firmer equity markets. The euro was helped lower earlier by weak EU PMI data, which was taken as a signal for ECB rate cuts, which perversely buoyed European bourses. U.S. data was softish, with new home sales nearly matching forecasts, and the Richmond Fed index posting a much weaker headline number. The White House bomb rumor provided a brief period of volatility in afternoon trade, where following the AP's twitter account being hacked, it was reported a bomb had exploded in the White House, injuring the president. Stocks and USD-JPY fell sharply on the reports, before quickly bouncing back to unchanged levels. Given the recent events in Boston, and the ricin scares in D.C., the markets remain very sensitive to the security backdrop.[EUR, USD]
EUR-USD longs got caught offside as weak German PMI data weighed heavily in Europe. There was early buying interest out of 1.3040 to 1.3085 after an improvement in French PMI data, but it was offset by a below expectations German reading. Germany, which has carried the eurozone during the fiscal crisis, saw weak services and manufacturing data and was the first drop since November and reinforced ECB rate cut expectations. U.S. trade saw the euro rebound some on short covering under 1.3000, which was driven by a rebound on Wall Street.[USD, JPY]
USD-JPY seemed to move higher in concert with the PMI release, though was about the only dollar pairing showing much reaction. The pairing rallied to intra day highs near 99.25 from 98.85, with light intra day stops reportedly tripped over the figure. Overnight Asian levels on either side of 99.25 provided some interim resistance, though the dollar eventually managed highs over 99.50. USD-JPY took the biggest hit after the White House bomb rumor, falling to 98.60 from 99.30 before bounding back to unchanged levels.[GBP, USD]
Cable posted recovery highs just over 1.5285 amid more talk of real money flows going through EUR-GBP. There has been heavy positioning since the the eurozone PMI releases amid increased expectations of an ECB rate cut. Central bank bids in EUR-USD at 1.2970 has seen EUR-GBP take up the slack and it is trading close to session lows around 0.8515. GBP showed no lasting impact from the negative CBI industrial trends release, with industry still optimistic that things will start to improve gradually into the second half of the year. Meanwhile, Cable has also seen flows related to today's option expiries, which include maturities at 1.5250 and 1.5260, as well as 1.5200 exposure.[USD, CHF]
EUR-CHF traded over 1.2255 for the first time since the middle of March on speculative flows. The cross benefited from the general pick up in the EUR, which came on EUR-JPY strength amid the 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 today, 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.[USD, CAD]
USD-CAD eased a bit after the better Canadian retail sales, touching 1.0255 from near 1.0275. Bids in place from 1.0245 put a floor under the pairing through the remainder of the session, though with risk appetite \on the mend again, downside USD-CAD pressure largely remained. The pairing shot briefly to 1.0270 from near 1.0250 after the White House bomb scare, though quickly eased back under 1.2060 into the close.