Currency Markets Update
The yen gained moderately against the dollar and euro in Tokyo Tuesday as Japanese players bought the currency for month end settlement and the half year’s repatriation of their overseas assets for bookkeeping, but ahead of the Bank of Japan’s Tankan survey, a closely watched quarterly business sentiment report, due Wednesday, currency traders and investors are unlikely to make big bets on the yen before the release. For that reason, any further falls in the dollar and euro later in the day will probably find a floor around JPY95 and JPY134.80 respectively.
On Monday, the euro vs dollar mostly tracked the price action on the stock markets. European stocks opened in negative territory but investor sentiment improved later in the session. The euro to dollar trended higher for most of the day and closed the session at USD1.4083, compared to USD1.4056 on Friday evening. This constructive global sentiment persisted in overnight trading as the EUR/USD is currently trading above the USD1.41 price level in the early European session.
The British pound fell to as low as USD1.6430 against the U.S. currency after comments from Zhou, however, it rose in tandem with the euro and hit an intra day high of 1.6587 in late New York afternoon.
The Australian dollar was stronger in late Asian trade Tuesday supported by a further improvement in risk appetite in global asset markets that weighed on safe haven assets like the greenback. The rally in the Australian currency defied the release of worse than expected domestic credit aggregates data that showed business lending slowing to a trickle.
Currency Market Outlook European Trading
The euro, yen and U.K. pound are all higher against the dollar on Tuesday, as forex players look to the stock markets for some inspiration.The UK Pound eased off ahead of the European open to USD1.6610 but soon picked up fresh demand interest into Europe. Release of stronger than expected nationwide house price data provided the added boost to spike the rate through USD1.6660/65 and on to USD1.6702. Profit taking then eased the rate back to USD1.6580 before secondary buying lifted it again, taking it on to USD1.6732. Offers are seen placed at USD1.6750 ahead of USD1.6800. Bids placed at USD1.6680, USD1.6660/50.
Strong spike higher in cable on housing data has lifted the euro vs dollar back to USD1.4125, but sales of euro sterling are seen acting as a counter weight. Offers remain in place at USD1.4130/40, a break here could open a move toward USD1.4180 ahead of USD1.4200. Support remains between USD1.4100/1.4095, with stops on a break of USD1.4090. Further bids noted toward USD1.4070 ahead of USD1.4055/50.
Traders will be watching the U.S. non-farm payrolls report for June due Thursday, with many economists expecting the report to show 350,000 jobs shed in June, compared to a 345,000 contraction in May. If the numbers are worse than expected, then the data could weigh on share markets, encouraging players to buy the yen, which they consider a safe haven asset.
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