After a week of roller coaster ride, market started this week in an upbeat mode as global equity and commodity markets rallied across the board and safe haven currencies were sold off. However, the relief in risk aversion were short-lived as today, softer than expected eurozone GDP data fed into EUR weakness and commodities currencies were taken a hit too. France-Germany meeting also failed to ease worries on the lingering euro zone troubles.
USD/CHF: The limelight CHF continued to weaken albeit at a gentler pace following last week massive selloff. Focus was on EUR/CHF peg and the talk was that SNB intended to floor the rate at 1.1 temporarily. SNB had many desperate and futile attempts before to stem swissy advance. However, injecting liquidity and cutting rates to near zero all fell into black hole. A high franc was seen menacing to the swiss economy and SNB appeared ready to pay a high price to halt the spiraling currency. Whether this is a verbal threat or real risk, investors appeared bothered to some extent.
After a record low of 0.70658 last week, USD/CHF staged a fiery reversal and shot up by 930 points to 0.7996, with most selling in CHF said to have come from EUR/CHF. Psychological barrier 0.8 remained intact as market sees some buying interest for the franc here, with USD/CHF retreating cautiously before finding support at 0.77715. The brief recovery in CHF today took a sudden twist going into NY session when USD/CHF surged 145 points to reach a day’s high of 0.79388. All eyes on tomorrow (17-Aug) as Swiss cabinet meets and is expected to decide on how best to support the SNB’s efforts to stabilize the franc.
USD/EUR: EUR rally lost steam. The pair started the day at 1.4415 and headed southwards amid disappointing eurozone GDP data. German Q2 GDP came in at 0.1% vs 0.5% expected while eurozone GDP came in at 0.2%Q/Q and 1.7%Y/Y vs 0.3%Q/Q and 1.8%Y/Y expected. Strong Spanish and Greek bond auctions failed to offer much support as market stayed focus on the economic problem. The pair gathered some strength following into NY session just before Sarkozy-Merkel press conference; it was testing 1.45 resistance momentarily as the leaders promised tax reforms to achieve closer economic cooperation in the region. But USD/EUR soon came off from its day high of 1.44708 to trade at 1.4391 at the point of writting.
USD/JPY: The day trade was confined to a range of 76.63-76.92. Despite the reversal in bear market late last week, USD/JPY was spared the volatility compared to other majors. CHF peg threat and US debt woes were sending safe haven flows to the yen which is now seen as a better insurance. Support for JPY provides some indication that concerns about the global economy and lingering Eurozone debt crisis and contagion into core economies remain.
No comments:
Post a Comment