EUR/USD
The Euro remained under pressure in early Europe on Wednesday and tested support levels close to 1.26 against the dollar. German GDP rose 0.2% in the first quarter which was slightly stronger than expected while the GDP data for the Euro-zone as a whole was marginally firmer than expected at 0.2%. The economic data continued to have only a limited impact as structural uncertainties remained the dominant focus.
The Spanish government announced that there would be additional spending cuts in order to reduce the budget deficit to 6% of GDP in 2 years time from around 11.2% this year. The deficit-reduction plans maintained fears that Euro-zone demand would remain very weak over the next year. In turn, there will be continuing expectations that the ECB will have to maintain a policy of very low interest rates which will tend to sap Euro support.
There were also still underlying fears that the latest support package would not be sufficient to prevent medium-term debt restructuring. There was also further speculation that from a longer-term perspective the Euro was over-valued at current levels.
The US trade deficit widened to a 15-month high of US$40.4bn for March, but the overall impact was limited as markets remained focussed elsewhere. Dollar Libor rates continue to edge slightly higher which maintained some fears over liquidity stresses and provided some dollar support. The Euro was unable to regain the 1.27 level and weakened back to near 1.36 late in US trading.
Source: VantagePoint Intermarket Analysis Software
Yen
Market forces were more balanced during Asian trading on Wednesday with some improvement in risk appetite offset by persistent doubts over the underlying situation. There was also unease over the situation surrounding China with several influential commentators voicing concerns over the risk of a sharp slowdown in the economy.
There was also a decline in the Nikkei index which stifled selling pressure on the Japanese currency. The dollar was unable to strengthen above the 93 resistance area and consolidated again in the 92.65 area with relatively narrow ranges.
Risk appetite was generally firmer in US trading on Wednesday and this allowed dollar gains to the 93.25 area where resistance levels remained firm.
Sterling
The UK unemployment data again recorded a bigger than expected decline in the claimant count of 27,100 for April after a decline of over 30,000 for March although the labour-market data again indicated a rise in unemployment.
The new UK coalition government appointed Ministers during the day and there was still a mood of relief over the prospect of near-term political stability and an ending of uncertainty.
In its latest inflation report, the Bank of England stated that there were downside risks to the economy while there was still a high degree of excess capacity in the economy. The bank also stated that inflation was likely to be below the 2.0% level in two years time if interest rates moved in line with market expectations.
Bank Governor King welcomed the government plans to tighten fiscal policy at a faster rate and there will also be expectations that the bank will keep interest rates at a very low level in order to compensate for the fiscal tightening.
The UK currency again hit selling pressure above 1.50 against the dollar and weakened to lows near 1.4820 on the prospect of fiscal tightening. The Euro regained the 0.85 level, but struggled to make much headway.
Swiss franc
The dollar found support on dips towards the 1.1050 level on Wednesday and pushed to a high of 1.1140 in US trading as ranges remained slightly narrower. The Euro remained firmly on the defensive against the franc and dipped to test support levels close to 1.4020 as Euro confidence remained very weak.
The Swiss economic data remained generally firm with an annual increase of 0.8% for producer prices in the year to April. With firm readings for business and consumer confidence there will be further expectations that the bank will decide against blocking franc gains.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The Australian dollar steadied above the 0.89 level against the US dollar on Wednesday, but buying support was limited with a peak below the 0.8980 level.
The domestic home loans data was again weaker than expected and will trigger some doubts over the economy. International trends are still likely to dominate and there is likely to be a more cautious attitude towards risk which will curb Australian dollar buying support.
The Australian dollar retreated back to the 0.8920 area later in US trading.
The Euro remained under pressure in early Europe on Wednesday and tested support levels close to 1.26 against the dollar. German GDP rose 0.2% in the first quarter which was slightly stronger than expected while the GDP data for the Euro-zone as a whole was marginally firmer than expected at 0.2%. The economic data continued to have only a limited impact as structural uncertainties remained the dominant focus.
The Spanish government announced that there would be additional spending cuts in order to reduce the budget deficit to 6% of GDP in 2 years time from around 11.2% this year. The deficit-reduction plans maintained fears that Euro-zone demand would remain very weak over the next year. In turn, there will be continuing expectations that the ECB will have to maintain a policy of very low interest rates which will tend to sap Euro support.
There were also still underlying fears that the latest support package would not be sufficient to prevent medium-term debt restructuring. There was also further speculation that from a longer-term perspective the Euro was over-valued at current levels.
The US trade deficit widened to a 15-month high of US$40.4bn for March, but the overall impact was limited as markets remained focussed elsewhere. Dollar Libor rates continue to edge slightly higher which maintained some fears over liquidity stresses and provided some dollar support. The Euro was unable to regain the 1.27 level and weakened back to near 1.36 late in US trading.
Source: VantagePoint Intermarket Analysis Software
Yen
Market forces were more balanced during Asian trading on Wednesday with some improvement in risk appetite offset by persistent doubts over the underlying situation. There was also unease over the situation surrounding China with several influential commentators voicing concerns over the risk of a sharp slowdown in the economy.
There was also a decline in the Nikkei index which stifled selling pressure on the Japanese currency. The dollar was unable to strengthen above the 93 resistance area and consolidated again in the 92.65 area with relatively narrow ranges.
Risk appetite was generally firmer in US trading on Wednesday and this allowed dollar gains to the 93.25 area where resistance levels remained firm.
Sterling
The UK unemployment data again recorded a bigger than expected decline in the claimant count of 27,100 for April after a decline of over 30,000 for March although the labour-market data again indicated a rise in unemployment.
The new UK coalition government appointed Ministers during the day and there was still a mood of relief over the prospect of near-term political stability and an ending of uncertainty.
In its latest inflation report, the Bank of England stated that there were downside risks to the economy while there was still a high degree of excess capacity in the economy. The bank also stated that inflation was likely to be below the 2.0% level in two years time if interest rates moved in line with market expectations.
Bank Governor King welcomed the government plans to tighten fiscal policy at a faster rate and there will also be expectations that the bank will keep interest rates at a very low level in order to compensate for the fiscal tightening.
The UK currency again hit selling pressure above 1.50 against the dollar and weakened to lows near 1.4820 on the prospect of fiscal tightening. The Euro regained the 0.85 level, but struggled to make much headway.
Swiss franc
The dollar found support on dips towards the 1.1050 level on Wednesday and pushed to a high of 1.1140 in US trading as ranges remained slightly narrower. The Euro remained firmly on the defensive against the franc and dipped to test support levels close to 1.4020 as Euro confidence remained very weak.
The Swiss economic data remained generally firm with an annual increase of 0.8% for producer prices in the year to April. With firm readings for business and consumer confidence there will be further expectations that the bank will decide against blocking franc gains.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The Australian dollar steadied above the 0.89 level against the US dollar on Wednesday, but buying support was limited with a peak below the 0.8980 level.
The domestic home loans data was again weaker than expected and will trigger some doubts over the economy. International trends are still likely to dominate and there is likely to be a more cautious attitude towards risk which will curb Australian dollar buying support.
The Australian dollar retreated back to the 0.8920 area later in US trading.
Filed under Latest FX Articles · Tagged with german gdp, intermarket analysis software, libor rates, risk appetite, us trade deficit
EUR/USD
The Euro found support below 1.26 against the dollar in early Europe on Friday and managed to maintain a firmer tone during the day, although there were still substantial losses for the week as a whole.
G7 members announced that they would hold talks during the day to discuss the situation within Europe and increased stresses within the financial markets. There was speculation that there would be measures to stabilise markets including the possibility of currency intervention, although these elements were denied by sources.
The headline US payroll report was stronger than expected with an increase of 290,000 for April following a revised 230,000 gain the previous month while February was also revised to register a monthly increase. There were firm readings across most sectors even though the numbers were pushed up by the hiring of temporary workers ahead of the census.
The unemployment rate rose to 9.9% from 9.7% as there was a large increase in the workforce which suggests that workers were more optimistic over finding work. The US currency managed to secure increased support on growth grounds following the data, although the influences were mixed as the data also had some impact in calming market nerves which curbed defensive demand for the US currency.
There was a renewed spike in risk aversion during US trading which pushed the Euro down to below 1.2650 before a recovery to above 1.27 on rumours that the ECB would announce a huge liquidity support operation for the banks. Underlying stresses were also illustrated by a further increase in Libor rates.
Source: VantagePoint Intermarket Analysis Software
Yen
During the Asian session on Friday, the Bank of Japan intervened to add JPY2trn into the money markets in order to stabilise conditions. Allied with speculation of G7 action, the dollar recovered further to the 92 area against the yen as volatility remained very high. Confidence remained fragile, especially with risk appetite still very fragile.
The dollar gained ground following the US employment data with an advance to just above 93. The yen gained some renewed support later in the US session on reports that some trading in Italian bond futures contracts had been suspended.
There was a fresh change of direction later in New York as there were some rumours of a fresh EMU support package over the weekend and the dollar regained the 91 level, although there were still sharp yen gains for the week.
Sterling
In the General Election, the opposition Conservative party will be the largest party in the parliament, but it will not be able to command a majority. From highs above 1.49 against the dollar, Sterling weakened towards 1.45 in early Europe on Friday on fears over political inaction.
There will be talks over the weekend and any announcement of a deal would tend to boost Sterling in early trading on Monday. In contrast, the currency is likely to be exposed to substantial selling pressure if the stalemate extends into next week.
Underlying confidence in the economy is also likely to remain very fragile, especially with the fact that international sovereign debt fears have increased over the past few weeks. Political and economic factors will, therefore, be closely entwined in the near term.
In this environment, there will be the threat of a sharp deterioration in Sterling sentiment on fears that the budget deficit will not be addressed.
Sterling was able to regain ground later in the US session with an advance back above the 1.47 level following heavy losses over the past 36 hours. From a peak near 0.88, the Euro consolidated near 0.86.
Swiss franc
Volatility remained higher on Friday, although ranges were slightly narrower. The dollar was unable to push above the 1.1180 level against the franc and tested levels below 1.1050 before consolidating slightly higher.
There was no evidence of National Bank intervention during the day and the Euro tested support near 1.4050 against the Swiss currency before finding some relief.
Risk trends will remain important and an underlying lack of confidence in the Euro-zone recovery will continue to underpin the Swiss currency.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The Australian dollar found support close to 0.88 against the dollar on Friday, but there was selling pressure above 0.8920 and the currency drifted weaker during US trading.
Risk appetite is likely to remain more fragile in the short term and this will also tend to curb Australian currency support, especially if equity prices are subjected to renewed selling pressure. A firm tone for gold prices should provide some degree of support for the Australian currency.
The Euro found support below 1.26 against the dollar in early Europe on Friday and managed to maintain a firmer tone during the day, although there were still substantial losses for the week as a whole.
G7 members announced that they would hold talks during the day to discuss the situation within Europe and increased stresses within the financial markets. There was speculation that there would be measures to stabilise markets including the possibility of currency intervention, although these elements were denied by sources.
The headline US payroll report was stronger than expected with an increase of 290,000 for April following a revised 230,000 gain the previous month while February was also revised to register a monthly increase. There were firm readings across most sectors even though the numbers were pushed up by the hiring of temporary workers ahead of the census.
The unemployment rate rose to 9.9% from 9.7% as there was a large increase in the workforce which suggests that workers were more optimistic over finding work. The US currency managed to secure increased support on growth grounds following the data, although the influences were mixed as the data also had some impact in calming market nerves which curbed defensive demand for the US currency.
There was a renewed spike in risk aversion during US trading which pushed the Euro down to below 1.2650 before a recovery to above 1.27 on rumours that the ECB would announce a huge liquidity support operation for the banks. Underlying stresses were also illustrated by a further increase in Libor rates.
Source: VantagePoint Intermarket Analysis Software
Yen
During the Asian session on Friday, the Bank of Japan intervened to add JPY2trn into the money markets in order to stabilise conditions. Allied with speculation of G7 action, the dollar recovered further to the 92 area against the yen as volatility remained very high. Confidence remained fragile, especially with risk appetite still very fragile.
The dollar gained ground following the US employment data with an advance to just above 93. The yen gained some renewed support later in the US session on reports that some trading in Italian bond futures contracts had been suspended.
There was a fresh change of direction later in New York as there were some rumours of a fresh EMU support package over the weekend and the dollar regained the 91 level, although there were still sharp yen gains for the week.
Sterling
In the General Election, the opposition Conservative party will be the largest party in the parliament, but it will not be able to command a majority. From highs above 1.49 against the dollar, Sterling weakened towards 1.45 in early Europe on Friday on fears over political inaction.
There will be talks over the weekend and any announcement of a deal would tend to boost Sterling in early trading on Monday. In contrast, the currency is likely to be exposed to substantial selling pressure if the stalemate extends into next week.
Underlying confidence in the economy is also likely to remain very fragile, especially with the fact that international sovereign debt fears have increased over the past few weeks. Political and economic factors will, therefore, be closely entwined in the near term.
In this environment, there will be the threat of a sharp deterioration in Sterling sentiment on fears that the budget deficit will not be addressed.
Sterling was able to regain ground later in the US session with an advance back above the 1.47 level following heavy losses over the past 36 hours. From a peak near 0.88, the Euro consolidated near 0.86.
Swiss franc
Volatility remained higher on Friday, although ranges were slightly narrower. The dollar was unable to push above the 1.1180 level against the franc and tested levels below 1.1050 before consolidating slightly higher.
There was no evidence of National Bank intervention during the day and the Euro tested support near 1.4050 against the Swiss currency before finding some relief.
Risk trends will remain important and an underlying lack of confidence in the Euro-zone recovery will continue to underpin the Swiss currency.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The Australian dollar found support close to 0.88 against the dollar on Friday, but there was selling pressure above 0.8920 and the currency drifted weaker during US trading.
Risk appetite is likely to remain more fragile in the short term and this will also tend to curb Australian currency support, especially if equity prices are subjected to renewed selling pressure. A firm tone for gold prices should provide some degree of support for the Australian currency.
Filed under Latest FX Articles · Tagged with g7 members, intermarket analysis software, liquidity support, risk appetite, risk aversion
EUR/USD
The Euro consolidated just above 1.28 in early Europe on Thursday with pressure for a limited technical correction. The currency was unable to secure sustained relief and retreated to fresh 14-month lows near 1.27 ahead of the ECB meeting as sentiment remained extremely weak.
Yield spreads widened on fears over a further contagion threat. There was also further speculation that Portugal and Spain would also require multilateral support.
The financial sector was also an important focus with fears of renewed stresses within capital markets and renewed losses within the banking sector which could trigger a renewed credit crunch.
There had been some speculation that the ECB would cut interest rates at the latest council meeting, but rates were left on hold at 1.0%. In the press conference following the meeting, Trichet stated that there had been no discussion of the bank buying bonds. Trichet stated that there was no possibility of Greece defaulting on its debt.
The latest US jobless claims data recorded a decline to 444,000 in the latest week from 451,000 previously which did not have a substantial impact as markets remained focussed on the European situation. Only a very large employment gain may trigger a big independent market reaction on Friday.
There was an increase in the 3-month Libor rate during the day which also raised some concerns that financial contagion was spreading. Underlying confidence in the Euro remained extremely weak during the day. Selling pressure intensified during the US session and the Euro weakened to a low near 1.25 in frenetic conditions as Wall Street plunged before recovering back to 1.2615.
Source: VantagePoint Intermarket Analysis Software
Yen
Japanese markets re-opened on Thursday after a three-day holiday and exporters took advantage of the firmer dollar to sell the US currency which helped underpin the yen to some extent. Risk appetite was also still generally fragile and the dollar edged lower to the 93.60 area.
The yen was firm on the crosses and the Euro tested important support levels close to 120 as European sentiment remained weak with some speculation over capital repatriation as Japanese equity markets fell sharply.
Risk appetite deteriorated sharply during the day which triggered fresh demand for the Japanese currency. The dollar retreated very sharply to lows below 88.50 against the yen as Wall Street plunged while the Euro remained under severe pressure with lows below the 111 level. Some degree of calm returned later in the session with the dollar moving back above the 90 level.
Sterling
Sterling weakened to lows near 1.50 against the dollar in early Europe on Thursday. The services-sector PMI index was weaker than expected at 55.2 from 56.5 the previous month which will undermine economic sentiment to some extent.
The election result will inevitably be important for confidence surrounding UK government debt and Sterling. Early exit polls suggested that there was an indecisive result. Underlying confidence is likely to remain very fragile, especially with the fact that sovereign debt fears have increased. In this environment, there will be the threat of a sharp deterioration in Sterling sentiment.
Risk appetite deteriorated very sharply during the day and this pushed the UK currency sharply weaker with a plunge to lows near 1.47 in New York before a recovery to 1.48.
Swiss franc
The dollar pushed to a high near 1.1250 against the Swiss franc on Thursday, but then weakened to lows near 1.10 as there were huge franc gains on the crosses before the dollar consolidated close to the 1.1120 area.
The Euro has been stuck close to 1.4320 against the Swiss currency for days, underpinned only by National Bank intervention. During Thursday, the central bank effectively stopped intervening in the markets and this put the Euro under severe selling pressure. The Euro weakened to a low close to the 1.40 level which was a record low for the Euro before some stabilisation.
Volatility levels are likely to remain higher in the short term and there will still be the potential for defensive inflows into the Swiss currency on Euro-zone fears.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The domestic data was weaker than expected with a 0.3% increase in retail sales for the latest month which will curb expectations of higher interest rates. Risk appetite remained extremely fragile and there was a renewed test of support below the 0.90 level against the US dollar on Thursday.
Trends in global risk appetite dominated over the remainder of the day and there was intense selling pressure on the currency in New York trade with the currency plunging to a low near 0.87 as equity markets fell very sharply. The Australian dollar rallied back to the 0.8850 area as the US session closed.
The Euro consolidated just above 1.28 in early Europe on Thursday with pressure for a limited technical correction. The currency was unable to secure sustained relief and retreated to fresh 14-month lows near 1.27 ahead of the ECB meeting as sentiment remained extremely weak.
Yield spreads widened on fears over a further contagion threat. There was also further speculation that Portugal and Spain would also require multilateral support.
The financial sector was also an important focus with fears of renewed stresses within capital markets and renewed losses within the banking sector which could trigger a renewed credit crunch.
There had been some speculation that the ECB would cut interest rates at the latest council meeting, but rates were left on hold at 1.0%. In the press conference following the meeting, Trichet stated that there had been no discussion of the bank buying bonds. Trichet stated that there was no possibility of Greece defaulting on its debt.
The latest US jobless claims data recorded a decline to 444,000 in the latest week from 451,000 previously which did not have a substantial impact as markets remained focussed on the European situation. Only a very large employment gain may trigger a big independent market reaction on Friday.
There was an increase in the 3-month Libor rate during the day which also raised some concerns that financial contagion was spreading. Underlying confidence in the Euro remained extremely weak during the day. Selling pressure intensified during the US session and the Euro weakened to a low near 1.25 in frenetic conditions as Wall Street plunged before recovering back to 1.2615.
Source: VantagePoint Intermarket Analysis Software
Yen
Japanese markets re-opened on Thursday after a three-day holiday and exporters took advantage of the firmer dollar to sell the US currency which helped underpin the yen to some extent. Risk appetite was also still generally fragile and the dollar edged lower to the 93.60 area.
The yen was firm on the crosses and the Euro tested important support levels close to 120 as European sentiment remained weak with some speculation over capital repatriation as Japanese equity markets fell sharply.
Risk appetite deteriorated sharply during the day which triggered fresh demand for the Japanese currency. The dollar retreated very sharply to lows below 88.50 against the yen as Wall Street plunged while the Euro remained under severe pressure with lows below the 111 level. Some degree of calm returned later in the session with the dollar moving back above the 90 level.
Sterling
Sterling weakened to lows near 1.50 against the dollar in early Europe on Thursday. The services-sector PMI index was weaker than expected at 55.2 from 56.5 the previous month which will undermine economic sentiment to some extent.
The election result will inevitably be important for confidence surrounding UK government debt and Sterling. Early exit polls suggested that there was an indecisive result. Underlying confidence is likely to remain very fragile, especially with the fact that sovereign debt fears have increased. In this environment, there will be the threat of a sharp deterioration in Sterling sentiment.
Risk appetite deteriorated very sharply during the day and this pushed the UK currency sharply weaker with a plunge to lows near 1.47 in New York before a recovery to 1.48.
Swiss franc
The dollar pushed to a high near 1.1250 against the Swiss franc on Thursday, but then weakened to lows near 1.10 as there were huge franc gains on the crosses before the dollar consolidated close to the 1.1120 area.
The Euro has been stuck close to 1.4320 against the Swiss currency for days, underpinned only by National Bank intervention. During Thursday, the central bank effectively stopped intervening in the markets and this put the Euro under severe selling pressure. The Euro weakened to a low close to the 1.40 level which was a record low for the Euro before some stabilisation.
Volatility levels are likely to remain higher in the short term and there will still be the potential for defensive inflows into the Swiss currency on Euro-zone fears.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The domestic data was weaker than expected with a 0.3% increase in retail sales for the latest month which will curb expectations of higher interest rates. Risk appetite remained extremely fragile and there was a renewed test of support below the 0.90 level against the US dollar on Thursday.
Trends in global risk appetite dominated over the remainder of the day and there was intense selling pressure on the currency in New York trade with the currency plunging to a low near 0.87 as equity markets fell very sharply. The Australian dollar rallied back to the 0.8850 area as the US session closed.
EUR/USD
The Euro dipped to 13-month lows around 1.2935 in early Europe on Wednesday before a limited corrective recovery.
The Euro-zone remained a key focus during the day as underlying stresses continued. Credit-ratings agency Moodys warned that it could downgrade Portugals debt rating in a review which will take place over the next three months. There were substantial protests against austerity measures within Greece which reinforced fears that fiscal tightening within the country would be unsustainable.
There were fears that the European banking sector would be damaged and the ECB monetary policies also came under focus with some speculation that the bank would need to take more aggressive measures to support the Euro-zone economy. Trichets comments following Thursdays council meeting will be watched very closely and will be important for Euro sentiment.
The US economic data was relatively close to expectations and did not have a major impact on the markets. The ADP report registered an increase in private-sector employment of 32,000 for April from a revised 19,000 gain the previous month.
The ISM report for the services sector was unchanged from the previous month at 55.4 for April which was slightly below expectations. The employment component was marginally lower than the previous month and also below the 50 level. The data overall will maintain expectations of a solid payroll figure on Friday, but will not lead to expectations of a stronger figure which will tend to curb further dollar support.
Euro fears dominated during the session and there was a fresh slide to lows near 1.2810 following the Portuguese rating warning. After a brief recovery, there was a slide back to the 1.28 area as risk appetite also remained weaker.
Source: VantagePoint Intermarket Analysis Software
Yen
Japanese markets remained closed for a holiday on Wednesday which dampened activity and exporter selling may be higher on Thursday. There were underlying doubts surrounding the Japanese fundamentals which curbed yen support, especially with the government due to release its fiscal plans next month which could influence the long-term credit ratings.
With the yen still vulnerable on yield grounds and support levels holding, the dollar advanced to 94.80 in early Europe on Wednesday.
Risk conditions remained very important during the day and the yen gained further support as European fears persisted. In this environment, the dollar weakened back to the 94 level in New York.
Sterling
The UK construction PMI index rose sharply to 58.2 for April from 53.1 the previous month which maintain some degree of optimism over near-term economic prospects.
Final opinion polls did not suggest that there was greater evidence of a decisive outcome and uncertainty remained high, but markets were slightly more confident that the opposition Conservative Party would be able to secure a mandate. The election of a majority government would tend to provide an initial Sterling boost.
The medium-term government-debt outlook will continue to be a very important cause for concern and should limit any scope for Sterling gains. There will also be fears over the credit-rating outlook, especially as the political constraints on the rating agencies will ease once the election has been concluded.
Wider European stresses continued to dominate and the UK currency pushed to a five-month high near 0.85 against the Euro. Sterling also found support below the 1.51 level against the dollar and consolidated near this level in New York.
Swiss franc
The dollar continued to advance strongly against the Swiss franc on Wednesday and pushed to fresh 12-month highs near 1.1190 in early US trading before briefly correcting back to 1.1120. The Euro was trapped close to the 1.4320 level against the franc and there will again be a strong suspicion that the Euro was being supported by National Bank intervention.
The sustained lack of confidence in the Euro-zone economy will continue to provide some protection for the Swiss currency. There is likely to be further speculation that the central bank will decide to abandon efforts to prevent the franc strengthening, especially with a generally stronger US dollar.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The Australian dollar dipped to lows around 0.9065 in Asia on Wednesday. There was a solid reading for building approvals and optimism over the domestic economy should cushion the currency from heavy selling pressure.
As risk appetite deteriorated in early US trading, the Australian dollar weakened to lows close to 0.9020 before a recovery to the 0.9085 level later in the US session. Buying the Australian dollar on dips remains an important market feature.
The Euro dipped to 13-month lows around 1.2935 in early Europe on Wednesday before a limited corrective recovery.
The Euro-zone remained a key focus during the day as underlying stresses continued. Credit-ratings agency Moodys warned that it could downgrade Portugals debt rating in a review which will take place over the next three months. There were substantial protests against austerity measures within Greece which reinforced fears that fiscal tightening within the country would be unsustainable.
There were fears that the European banking sector would be damaged and the ECB monetary policies also came under focus with some speculation that the bank would need to take more aggressive measures to support the Euro-zone economy. Trichets comments following Thursdays council meeting will be watched very closely and will be important for Euro sentiment.
The US economic data was relatively close to expectations and did not have a major impact on the markets. The ADP report registered an increase in private-sector employment of 32,000 for April from a revised 19,000 gain the previous month.
The ISM report for the services sector was unchanged from the previous month at 55.4 for April which was slightly below expectations. The employment component was marginally lower than the previous month and also below the 50 level. The data overall will maintain expectations of a solid payroll figure on Friday, but will not lead to expectations of a stronger figure which will tend to curb further dollar support.
Euro fears dominated during the session and there was a fresh slide to lows near 1.2810 following the Portuguese rating warning. After a brief recovery, there was a slide back to the 1.28 area as risk appetite also remained weaker.
Source: VantagePoint Intermarket Analysis Software
Yen
Japanese markets remained closed for a holiday on Wednesday which dampened activity and exporter selling may be higher on Thursday. There were underlying doubts surrounding the Japanese fundamentals which curbed yen support, especially with the government due to release its fiscal plans next month which could influence the long-term credit ratings.
With the yen still vulnerable on yield grounds and support levels holding, the dollar advanced to 94.80 in early Europe on Wednesday.
Risk conditions remained very important during the day and the yen gained further support as European fears persisted. In this environment, the dollar weakened back to the 94 level in New York.
Sterling
The UK construction PMI index rose sharply to 58.2 for April from 53.1 the previous month which maintain some degree of optimism over near-term economic prospects.
Final opinion polls did not suggest that there was greater evidence of a decisive outcome and uncertainty remained high, but markets were slightly more confident that the opposition Conservative Party would be able to secure a mandate. The election of a majority government would tend to provide an initial Sterling boost.
The medium-term government-debt outlook will continue to be a very important cause for concern and should limit any scope for Sterling gains. There will also be fears over the credit-rating outlook, especially as the political constraints on the rating agencies will ease once the election has been concluded.
Wider European stresses continued to dominate and the UK currency pushed to a five-month high near 0.85 against the Euro. Sterling also found support below the 1.51 level against the dollar and consolidated near this level in New York.
Swiss franc
The dollar continued to advance strongly against the Swiss franc on Wednesday and pushed to fresh 12-month highs near 1.1190 in early US trading before briefly correcting back to 1.1120. The Euro was trapped close to the 1.4320 level against the franc and there will again be a strong suspicion that the Euro was being supported by National Bank intervention.
The sustained lack of confidence in the Euro-zone economy will continue to provide some protection for the Swiss currency. There is likely to be further speculation that the central bank will decide to abandon efforts to prevent the franc strengthening, especially with a generally stronger US dollar.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
The Australian dollar dipped to lows around 0.9065 in Asia on Wednesday. There was a solid reading for building approvals and optimism over the domestic economy should cushion the currency from heavy selling pressure.
As risk appetite deteriorated in early US trading, the Australian dollar weakened to lows close to 0.9020 before a recovery to the 0.9085 level later in the US session. Buying the Australian dollar on dips remains an important market feature.
Filed under Latest FX Articles · Tagged with aggressive measures, austerity measures, intermarket analysis software, private sector employment, risk appetite
EUR/USD
The Euro was unable to make any headway in early Europe on Tuesday as German retail sales fell sharply which reinforced Euro-zone economic doubts.
Developments surrounding the Greek and Euro-zone debt situations remained very important during the day. Confidence remained very fragile amid fears that the Greek support package would not be effective, especially as it would tend to deepen recession and deflation fears.
There were also a series of market rumors during the day which undermined Euro confidence. There were reports from within Germany that the Greek package would be insufficient over the next three years as a whole. There was also a media report that Spain was seeking a EUR280bn support package to support its own economy. These rumours were denied by Spanish and IMF officials, but overall confidence remained weaker with officials finding it difficult to contain the contagion threat, while there were fears that ECB independence could be compromised in the medium term.
The US economic data was stronger than expected with a 5.3% increase in pending home sales for March while factory orders rose 1.3% for the month. Although of only limited importance directly, the data will reinforce expectations that the US economy will out-perform the Euro area over the next few months. There will also be confidence over a firm Friday payroll report which should underpin the dollar.
Risk appetite dipped sharply in US trading as European debt fears undermined wider confidence and this intensified selling pressure on the Euro with a low below 1.30 during New York trading, the first time this level had been breached since last April.
Source: VantagePoint Intermarket Analysis Software
Yen
The yen remained weaker in Asian trading on Tuesday with a test of important dollar resistance close to 95 as risk appetite was firmer.
Yield factors also remained important with expectations that the trends will continue to move against the yen and trigger further capital outflows into higher yield instruments.
The dollar was unable to capitalise on the gains and dipped back towards 94.30 in US trading. The yen gained significant support as risk appetite deteriorated with falling equity markets curbing capital outflows. The Euro also weakened to a low below 123 against the Japanese currency.
Sterling
The UK currency was still struggling against the dollar on Tuesday with a renewed slide towards the 1.52 level, but held firm against the Euro as European sentiment remained weak.
The PMI index for the services sector was strong at a 15-year high which will reinforce near-term optimism over the industrial sector. In contrast, the consumer and business lending data was much weaker than expected which will maintain unease over medium-term prospects and the risks of a renewed credit crunch, especially with corporate lending falling.
Sterling weakened to a 5-week low against the dollar below 1.51 during the day, but was resilient against the Euro with Sterling strengthening to near 0.8570.
Final opinion polls will be watched closely over the next 24 hours and Sterling could gain some support if there is greater evidence of a decisive outcome. The medium-term government-debt outlook will continue to be an important cause for concern and should limit any scope for Sterling gains.
Swiss franc
The dollar found support below 1.0850 against the Swiss franc on Tuesday and then gained steadily during the day with a high above 1.10 which was a fresh 10-month high for the US currency.
The Euro remained locked close to the 1.4320 level against the Swiss currency as underlying confidence in the currency remained weak.
The sustained lack of confidence in the Euro-zone economy will continue to provide some protection for the Swiss currency. There is likely to be further speculation that the National Bank will decide to abandon efforts to prevent the franc strengthening.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
As expected, the Reserve Bank of Australia increased interest rates by 0.25% to 4.50%. The statement, on balance, was slightly stronger than expected with a warning that inflation will not fall as much as expected, but the Australian dollar was unable to make any significant headway and dipped to lows just below the 0.92 level in local trading.
Risk appetite was generally weaker which stifled currency demand as Chinese equity markets fell again. Fears intensified during the day and the Australian dollar weakened to a low below 0.91 against the US currency as equity markets declined sharply.
The Euro was unable to make any headway in early Europe on Tuesday as German retail sales fell sharply which reinforced Euro-zone economic doubts.
Developments surrounding the Greek and Euro-zone debt situations remained very important during the day. Confidence remained very fragile amid fears that the Greek support package would not be effective, especially as it would tend to deepen recession and deflation fears.
There were also a series of market rumors during the day which undermined Euro confidence. There were reports from within Germany that the Greek package would be insufficient over the next three years as a whole. There was also a media report that Spain was seeking a EUR280bn support package to support its own economy. These rumours were denied by Spanish and IMF officials, but overall confidence remained weaker with officials finding it difficult to contain the contagion threat, while there were fears that ECB independence could be compromised in the medium term.
The US economic data was stronger than expected with a 5.3% increase in pending home sales for March while factory orders rose 1.3% for the month. Although of only limited importance directly, the data will reinforce expectations that the US economy will out-perform the Euro area over the next few months. There will also be confidence over a firm Friday payroll report which should underpin the dollar.
Risk appetite dipped sharply in US trading as European debt fears undermined wider confidence and this intensified selling pressure on the Euro with a low below 1.30 during New York trading, the first time this level had been breached since last April.
Source: VantagePoint Intermarket Analysis Software
Yen
The yen remained weaker in Asian trading on Tuesday with a test of important dollar resistance close to 95 as risk appetite was firmer.
Yield factors also remained important with expectations that the trends will continue to move against the yen and trigger further capital outflows into higher yield instruments.
The dollar was unable to capitalise on the gains and dipped back towards 94.30 in US trading. The yen gained significant support as risk appetite deteriorated with falling equity markets curbing capital outflows. The Euro also weakened to a low below 123 against the Japanese currency.
Sterling
The UK currency was still struggling against the dollar on Tuesday with a renewed slide towards the 1.52 level, but held firm against the Euro as European sentiment remained weak.
The PMI index for the services sector was strong at a 15-year high which will reinforce near-term optimism over the industrial sector. In contrast, the consumer and business lending data was much weaker than expected which will maintain unease over medium-term prospects and the risks of a renewed credit crunch, especially with corporate lending falling.
Sterling weakened to a 5-week low against the dollar below 1.51 during the day, but was resilient against the Euro with Sterling strengthening to near 0.8570.
Final opinion polls will be watched closely over the next 24 hours and Sterling could gain some support if there is greater evidence of a decisive outcome. The medium-term government-debt outlook will continue to be an important cause for concern and should limit any scope for Sterling gains.
Swiss franc
The dollar found support below 1.0850 against the Swiss franc on Tuesday and then gained steadily during the day with a high above 1.10 which was a fresh 10-month high for the US currency.
The Euro remained locked close to the 1.4320 level against the Swiss currency as underlying confidence in the currency remained weak.
The sustained lack of confidence in the Euro-zone economy will continue to provide some protection for the Swiss currency. There is likely to be further speculation that the National Bank will decide to abandon efforts to prevent the franc strengthening.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
As expected, the Reserve Bank of Australia increased interest rates by 0.25% to 4.50%. The statement, on balance, was slightly stronger than expected with a warning that inflation will not fall as much as expected, but the Australian dollar was unable to make any significant headway and dipped to lows just below the 0.92 level in local trading.
Risk appetite was generally weaker which stifled currency demand as Chinese equity markets fell again. Fears intensified during the day and the Australian dollar weakened to a low below 0.91 against the US currency as equity markets declined sharply.
Filed under Latest FX Articles · Tagged with imf officials, intermarket analysis software, market rumors, payroll report, risk appetite
