has managed to stage an impressive recovery
out from its recent 2010/multi-year lows, and has done so even in the face of a high degree of uncertainty and heavy liquidation in global equities prices.
The only seemingly logical explanation for the relative Euro strength is that there has indeed been some coordinated intervention to help curb the depreciation
in the beleaguered currency.
Some of the big movers have been on the Euro/Commodity crosses,
absolutely obliterated in the face of this new wave of global fear. Meanwhile, some added intervention from the SNB has forces a serious jackknife reversal in the Eur/Chf cross
which trades over 5 big figures off of its early week record lows by 1.4000. The Yen
crosses have also been hurting on the risk aversion theme, although we have seen some recovery into Friday.
US Secretary Geithner has scheduled a trip to the UK and Germany next week to discuss the current crisis, which further strengthens and reaffirms the likelihood of coordinated intervention. Elsewhere, Japanese FinMin Kan has been on the wires saying that FX rates should be set by markets even though it is undesirable to see such a strong Yen.
The Bank of Japan
has come out and left its call rate unanimously unchanged at 0.10% as widely expected, and the news has hardly factored into price action. Finally, the US Senate
has officially approved the Wall Street
reform bill which greenlights a massive overhaul of financial regulation; including strengthening oversight of derivatives trading.
Looking ahead, German GDP (0.2% expected) and other secondary German data are due at 6:00GMT, followed by Swiss money supply at 7:00GMT. The Eurozone current account is then out at 8:00GMT, along with German IFO (101.9 expected), with UK money supply (3.8% expected), total business investment (-0.6% expected), public finances (7.0B expected) and major banks mortgage approvals (54k expected), all capping things off for European trade at 8:30GMT. US equity futures are showing some signs of life following Thursday’s concerning session, while commodities continue to track lower.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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