2013-04-25 19:53 (UTC)
XE Market Analysis
The dollar was mostly higher versus the yen and European majors in N.Y. trade on Thursday, while losing some ground to the dollar bloc. EUR-USD was soft on the back of ECB rate cut prospects, while USD-JPY was boosted ass the BoJ should reiterate its policy stance and it could potentially re-fuel yen selling. Lower than expected weekly jobless claims gave Wall Street a boost, as did decent earnings reporting. Friday's U.S. calendar reveals advance Q1 GDP, and the final U. of Michigan sentiment survey.[EUR, USD]
EUR-USD tumbled on a think tank report, which said the ECB will cut rates next week. Goldman Sachs has also revised its rate forecast and now expects a 25 bps cut in May, which followed a number of rate cut calls after weak eurozone data this week. The EUR had benefited on an improvement in risk appetite as investors cheered rate cut hopes, while there was added EUR demand from Asian sovereigns that were active in local currencies this week. EUR-USD later flirted with the 1.3000 mark, after intra day sell stops from 1.3025 were tripped up. Bids were seen into the figure and under, with sovereign interest noted out of Asia. The pairing based just under 1.2990 before reclaiming the 1.30 handle into the close.[USD, JPY]
USD-JPY headed to 99.50 after it benefited from EUR-USD's reversal. Since the Asian session USD-JPY movement has been sticky and it struggled to sustain higher levels as funds repositioned ahead of tomorrow's BoJ policy outcome. Dollar longs had gambled on 100.00 dealing ahead of the policy outcome, but massive expiries have capped throughout the week. $1.5 bln rolled off today and there are strikes in excess of $3 bln rolling off tomorrow. BoJ should reiterate its policy stance and it could potentially re-fuel yen selling. However, there may be a limited window for a USD-JPY push higher with the Japanese Golden Week holiday on the horizon.[GBP, USD]
Cable is consolidating gains after option barriers gave way at 1.5450 late on in the European morning. Two sovereign names were spotted close to intra-day highs ahead of offers at 1.5470 and 1.5500, where further option barriers are likely. The Cable surge from under 1.5300 should a pick up now in close-to-market bids into 1.5420 and 1.5400, where option strikes are noted, along with 1.5450. The better U.K. GDP print is likely to keep the BoE on hold in May and possibly June, which is the last meeting for current BoE Governor King. There are some expectations of further easing when Carney takes the reins, but MPC members may be inclined to wait on the impact from the extended FLS scheme, which was announced on Wednesday.[USD, CHF]
EUR-CHF stalled ahead of 1.2350 barriers and headed back to the 1.2280 region as early selling pressure went through. Interest is noted mainly from local names and one standout German account, though the underlying tone is still skewed to higher levels. The topside break on Tuesday over 1.2250 fuels buying interest on dips. However, the increased move out of the CHF is being exacerbated by speculation that SNB will raise the lower limit in EUR-CHF from 1.2000 to 1.2500. SNB policy rhetoric does not suggest that this is in the pipeline and upward momentum may run out of steam once this risk passes. From a technical perspective the cross is more likely to challenge previous tops from early March just ahead of 1.2400 barriers.[USD, CAD]
USD-CAD finally managed to move under the 1.0200 mark, posting a low near 1.0185. Stops were a factor at the figure, and a Canadian name reportedly was a good seller from 1.0210. Downside was bcontained by corporate demand though, with today being the first time on the 1.01 handle since April 12.