Currency Markets – Yesterday & Overnight
The euro continued to rise against the dollar and yen in Asia Thursday as the region’s investors became more optimistic towards the European economy after recent data, and more risk tolerance as crude oil prices moved higher. One indicator which has provided a bullish tone toward the euro zone was this week’s German ZEW data, which measures sentiment among European financial analysts. The headline figure came in at 44.8, much better than the consensus forecast of 37.0, although all such indicators have to be treated with a degree of caution ( like many other items of fundamental news!). The recent rise in crude oil prices is also lifting the euro, by whetting investors’ risk appetite, and prompting more purchases of euro denominated risk assets. The euro has been considered a higher risk currency than its U.S. and Japanese counterparts recently, and as a result has benefited when the market’s risk appetite has increased. Asian traders were also talking Thursday about the effect on the currency market of the planned JPY923 billion share offering by Sumitomo Mitsui Financial Group Inc., Japan’s third largest bank.
The UK Pound dropped against the U.S. currency in the European session yesterday as stocks slipped. Despite a brief but sharp rise after the U.K. claimant count in May came in better than expected, sterling tumbled from USD1.6483 to an intra-day low of USD1.6220 against the dollar. However, the pound was able to stage a strong rebound in tandem with the euro in the New York session, partly due to the low U.S. inflation data and short covering.
The Australian dollar was weaker in the Asian session late Thursday as the currency ran into significant resistance at the 0.80 price level against the US dollar, on the back of a continued decline in global equities markets.
Currency Markets – Outlook Morning Trading Session
The euro and other major currencies are trading narrowly on Thursday in movements lacking any discernible patterns, and generally consolidating in a narrow trading range, with some currency traders now of the view that the euro may keep rising because it looks as though the European economy is stronger than they anticipated a few weeks ago. The euro vs dollar is currently trading around the 1.3950 level, with offers remaining in place from around 1.3985 through to 1.4000. A break above this level could open a move on toward 1.4015/20 ahead of 1.4040/50. Support is seen at1.3920, with minor interest towards the 1.3900 level, ahead of 1.3885/80 and 1.3860.
For UK sterling bids remain in place between 1.6345/35, a break below would suggest a deeper move toward USD1.6300 ahead of 1.6280/70. Offers are noted between 1.6415/25, a break above could open a move toward 1.6450.
With regard to the Japanese yen, we may see some non Japanese investors buy the Japanese currency to acquire the bank’s new shares with payments for the public offering due by June 22.
European stocks are expected to open largely flat Thursday, as investors digest news surrounding the banking sector on both sides of the Atlantic.
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