The session had all the earmarks of another harrowing day of risk aversion. Then something unexpected broke out … calm. Equity markets in Europe ended lower, but well off their lows. The S&P 500, in positive territory much of the day, has quietly dropped to mere ticks from the 200-dma at 1257. In FX, JPY, CHF and USD were top performers; CAD, NZD and GBP the worst, though they are off the lows. Has anything materially changed? N o.
Risk sentiment remains on knife edge, despite crackingly poor regional Fed factory sector survey, though housing starts were better-than-expected, a rare piece of good news on US housing. EUR/USD was well below the 100-dma at $1.4154 early, but is a touch above it now. DXY too flirted with its 100-dma at 75/ 77, before slipping. Of late, USD rallies have proven hard to sustain. We’ll watch this one, as well as DXY-weighted swap spreads, which have an important impact on DXY direction, though not on the degree of DXY moves.
GBP: Though EUR managed a fairly peppy bounce off its lows, GBP’s bounce lacked vigour, hampered by the lingering overhand of VERY weak retail sales data (ex-autos/ fuel: -1.6% m/m, cons: -0.6%). GBP/ USD thus remains below trend line support back to May 2010 and the 200-dma looms at $1.6015. Meantime, on GBP/CHF, watch 1.3615 (spot ~ 1.3688), which was its all-time low. CHF was the top performer overnight even though the SNB left rates unchanged. SNB Chairman did bemoan the CHF-inspired squeeze of exporters' margins, but SNB Board member Danthine said “there is no reason at the moment for either interventions or extraordinary measures.” Game on.
Risk sentiment remains on knife edge, despite crackingly poor regional Fed factory sector survey, though housing starts were better-than-expected, a rare piece of good news on US housing. EUR/USD was well below the 100-dma at $1.4154 early, but is a touch above it now. DXY too flirted with its 100-dma at 75/ 77, before slipping. Of late, USD rallies have proven hard to sustain. We’ll watch this one, as well as DXY-weighted swap spreads, which have an important impact on DXY direction, though not on the degree of DXY moves.
GBP: Though EUR managed a fairly peppy bounce off its lows, GBP’s bounce lacked vigour, hampered by the lingering overhand of VERY weak retail sales data (ex-autos/ fuel: -1.6% m/m, cons: -0.6%). GBP/ USD thus remains below trend line support back to May 2010 and the 200-dma looms at $1.6015. Meantime, on GBP/CHF, watch 1.3615 (spot ~ 1.3688), which was its all-time low. CHF was the top performer overnight even though the SNB left rates unchanged. SNB Chairman did bemoan the CHF-inspired squeeze of exporters' margins, but SNB Board member Danthine said “there is no reason at the moment for either interventions or extraordinary measures.” Game on.
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