Currency Markets - Yesterday & Overnight
The dollar made slight gains against the euro and was steady against the yen in Asian trading Thursday, sticking to narrow ranges ahead of key U.S. jobs data later in the global day. The dollar was trading at JPY96.60, just a single tick above JPY96.59 in late North American trading on Wednesday. Earlier in the day, the U.K.’s Daily Telegraph newspaper reported that Russian banks may need to raise USD60 billion in fresh capital to cover an increasing number of bad loans, citing a Fitch Ratings analyst.
Yesterday, the Euro tested USD1.4000 but managed to shrug off heavy pound vs dollar falls post the dreadful GDP data. EU inflation fell 0.1% y/y in June, whilst German Unemployment rose to 8.3% as expected. The Euro found good buying interest as China purchasing mangers’ index for June rose to 53.2 from 53.1 in May, consolidating the fourth month in a row above the watershed mark of 50.
The British pound fell against the dollar after the previous day’s unexpectedly sharp downward revision to UK GDP continued to hamper the currency. The purchasing managers index rose to 47.0 in June from 45.4 in May. The UK also recorded a bigger than expected current account deficit of GBP8.540 billion in the first quarter.
The Canadian dollar strengthened against the dollar as crude oil prices rebounded back above USD71 per barrel, helping the commodity-linked currency. The Australian dollar was marginally stronger in Asian trade late Thursday as support provided by stronger equities performance was eroded by a wider than expected blowout in the trade deficit. The currency is now close to the middle of the recent range it has held in past weeks and is expected to tread water ahead of the release of the U.S. non-farm payrolls data for June later Thursday.
Currency Market Outlook Today
With the market remaining bearish on the euro, it may decline further in the thin flow market ahead of the three day weekend in the U.S. that starts with Independence Day on Friday. The Australian dollar and the euro are what some players call “riskier currencies” and they tend to move in the same direction against the dollar.
Euro sterling, which had been correcting away from its New York high at 0.8596 through the Asian session, easing from stg0.8586 to stg0.8565, spiked higher to make a brief show above 0.8600, touching 0.8601 before easing back to currently trade around 0.8588. This move may allow cable to recover back to current levels around USD1.6440, but is expected to meet resistance on the approach to 1.6450. A break above here may open a move back to USD1.6480 ahead of a stronger area around 1.6500. Support remains in place at USD1.6410/00.
The euro vs dollar is adding to earlier reports of demand placed between 1.4100/80, trader’s note that stops are building in the area between USD1.4080/70. Further demand is seen placed toward USD1.4050 with reports of more stops below.
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