Forex – Yen Pushes Higher; Euro in Focus as ECB Meets

© Reuters.  © Reuters.

Investing.com – The safe haven Japanese yen gained against the U.S. dollar Thursday on a sharp bout of risk aversion, as battles to contain the new pneumonia-like virus in China intensified, although volatility remained limited.

By 03:30 ET (0830 GMT), the yen had climbed 0.2% against the dollar, with trading at 109.56. The Chinese yuan dropped 0.4% against the greenback, with trading at 6.9313. The Futures, which tracks the greenback against a basket of other currencies, was essentially flat at 97.30.

Earlier Thursday, China issued a travel suspension in Wuhan, a city of 11 million at the center of the outbreak of the coronavirus, as its latest attempt to stop the spread of the disease. The virus has killed at least 17 people so far and infected hundreds of people in China, and as far afield as the U.S., Thailand, Taiwan, Japan and the Republic of Korea.

Elsewhere, the pair inched down 0.1% to 1.1087 as traders awaited the European Central Bank (ECB) policy meeting due later in the day. The meeting will be followed by a press conference with President Christine Lagarde.

Economists expect no changes in any of the monetary policy instruments, and the focus will be on the central bank’s outlook and information on its the strategic review.

“In this environment, markets could pay most attention to the comments talking about a tentative stabilization of economic data and some removal of downside risks,” said analysts at Nordea, in a research note, “which in other words would mean less need for immediate easing.”

That said, Nordea doesn’t expect the euro to receive much lasting support from the central bank, “as the bar for the market to price in any notable ECB tightening remains high.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Euro Heads Toward a Make-or-Break Policy Week Versus Sterling

Euro Heads Toward a Make-or-Break Policy Week Versus Sterling Euro Heads Toward a Make-or-Break Policy Week Versus Sterling

(Bloomberg) — The euro’s January consolidation against the faces a test next week, when the European Central Bank meets and U.K. data may decide whether the Bank of England cuts interest rates.

Options traders see a low risk so far for a breakout from the pair’s month-long range and volatility remains suppressed, keeping hedging costs low for those taking no chances. Attention will be on Thursday’s outline of the ECB’s strategic review, particularly its implications for shifting the outlook among policy makers. That will be followed by the U.K. Purchasing Managers Indexes for January on Friday.

While the ECB is just expected to monitor the impact of its policy so far, money market traders have started to assign a higher probability for a BOE cut, with current pricing at around 75% for a move at its Jan. 30 meeting. A combination of dovish comments from officials and soft U.K. data has weighed on the pound recently, yet the euro has been unable to significantly benefit, with rallies versus the dollar met this week by profit-taking interest.

The euro reversed early losses versus sterling on Friday and stood at 85.21 pence per euro after data showed that U.K. retail sales unexpectedly fell in December. One-week implied volatility trades at 6.28%, near the lower end of its range since early 2018 and compared to a past-year average of 7.76%. The breakeven into next week’s events currently stands at 64 pound pips, according to Bloomberg pricing, suggesting traders are not expecting any fireworks next week.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Forex – Sterling Slips vs Dollar, Euro as Vlieghe Fuels Rate Hopes

© Reuters.  © Reuters.

Investing.com — The dollar opened the week stronger against the and the Japanese , but weaker against the euro, with markets still unsettled by the weak labor market report on Friday.

The , which measures the greenback against a basket of currencies, was effectively unchanged at 3:10 AM ET (0810 GMT) at 97.130. However, that masked a 0.5% rise for the dollar against sterling, which continued to suffer from speculation on an interest rate cut from the Bank of England. The was up marginally at $ 1.1128.

Speeches by Governor Mark Carney and Monetary Policy Committee member Silvana Tenreyro last week had encouraged hopes of a cut. Over the weekend, another MPC member Gertjan Vlieghe, had signalled in an interview with the Financial Times that he would also back a rate cut barring “an imminent and significant improvement in the U.K. data.”

Vlieghe will get his chance to judge on that at 4:30 AM ET (0930 GMT) with the latest update on and its components, along with data for November. The National Institute of Economic and Social Research publishes its later at 9 AM ET (1400 GMT).

“Sterling seems to be caught between the bid from the under-weight asset managers and some speculators seeing the Brexit uncertainty lifted on the one hand, and the under-appreciated risks of a rate cut and a no-deal Brexit still on the other,” said Marc Chandler, managing partner of Bannockburn Global Forex. He sees a near-term range of $ 1.2900-$ 1.3200 for Cable.

The continued unrest in Iran over the weekend appears to have had little impact on broader sentiment, which is firmly in risk-on mode as the risk of war with the U.S. recedes and the signing of the preliminary trade agreement between China and the U.S. – scheduled for Wednesday – draws nearer.

The broke through 6.90 to the dollar for the first time in five months overnight, while the rose to a 20-month high. The dollar also continued to lose ground against other barometers of risk appetite such as the Indonesian and Turkish .

Analysts at Nordea pointed to the incongruity of sharply rising emerging market currencies, given the consistently weak numbers coming out of global purchasing manager indexes.

“Either EM FX and equities are too expensive or else the global manufacturing PMI is about to explode higher. It is do or die time,” analysts Andrea Steno Larsen and Martin Enlund said. “It’s very hard to find a trigger for a weakening market at present (outside of Iran maybe) but maybe that is a worrying sign in itself?”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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EU executive urges euro zone to use fiscal policy to bolster ECB

BRUSSELS (Reuters) – The European Commission called on euro zone governments on Tuesday to use fiscal policy and engage in structural reforms to help the European Central Bank’s efforts to boost inflation and job creation.

In annual recommendations for the 19 countries that share the euro, the EU executive said governments should also start talks on setting up a bank deposit insurance scheme and said it would propose a pan-EU unemployment reinsurance scheme.

“The European Central Bank is maintaining an accommodative monetary policy to help inflation edge towards its medium-term inflation objective, while supporting growth and job creation,” the Commission said.

“Fiscal policy needs to complement the monetary policy stance, as are structural reforms across different sectors, including those necessary to complete the architecture of the Economic and Monetary Union (EMU),” it said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Pound Rally Passes Euro Milestone as Polls Back Conservatives

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The pound strengthened Monday to a fresh two-and-a-half year high against the , as weekend opinion polls continued to point to a win for the ruling Conservatives in this week’s general election.

The currency also rose against the after polls in Britain’s Sunday newspapers all putting Boris Johnson’s party in the lead. Though the gap between the parties has narrowed throughout the campaign, it is not enough to keep the Conservatives from returning to power this week. The weekend surveys spurred buying by European investors, according to traders.

“The pound is rallying again after markets all but fully discount a good Tory majority,” wrote Elsa Lignos, global head of currency strategy at Royal Bank of Canada, in a research note. “Friday will show whether that was a good strategy or not.”

As well as gaining 0.3% to 83.93 pence per euro, it also added as much as 0.3% against the dollar to $ 1.3181 Monday. The pound has strengthened 3% against the U.S. currency over the past month, as investors grow increasingly confident of a win for Johnson in the December vote. Still, the cost of hedging against a fall in the pound has also surged as the election looms, showing lingering caution following the failure of most opinion polls to accurately predict prior votes such as the 2016 Brexit referendum.

The spot rate for the pound-dollar pair continues to diverge with options, as two-week risk reversals show increased demand to hedge an unexpected outcome from Thursday’s voting. A Bloomberg survey last month found the pound would fall to $ 1.27 on a Labour-led coalition outcome, a more than 3% drop from current levels.

Positioning on the currency also remains mixed, with leveraged funds slashing short positions to the lowest since May while asset managers have turned more bearish on the currency, according to the latest data from the Commodity Futures Trading Commission.

“The scope for surprise at this week’s general election is sizeable,” wrote Goldman Sachs (NYSE:) strategists including Alain Durre in a research note. “The share of voters that are still undecided- so late in the campaign- means that even a small swing in that slice of the electorate would lead to a hung parliament.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Forex: Dollar Surges Against Euro on Stronger U.S. Jobs Report

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Investing.com – The U.S. dollar rallied on Friday as stronger-than-expected U.S. jobs gains last month reaffirmed beliefs that the economy remained on solid footing.

The , which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.35% to 97.75.

The U.S. created jobs last month, topping economists’ forecast of 186,000.

The unexpectedly dropped to 3.5% and wage growth slipped to 0.2% in November, lower than expectations of 0.3%.

Following the stronger-than-expected jobs report, TD economists said the Federal Reserve can sit comfortably on the sidelines after cutting rates three times this year.

“As long as international risks do not intensify and hurt confidence domestically, the American economy will remain in expansion, supported by a healthy consumer,” the firm added.

The , which was already under pressure amid weaker German data, fell 0.45% against the greenback to $ 1.105.

fell 0.12% to Y108.62, while jumped 0.67% to C$ 1.326, with the latter coming under pressure following a weaker-than-expected .

The plunge in the comes amid reports that Bank of Canada governor Stephen Poloz is set to step down just days ahead of the central bank’s .

slipped 0.23% to $ 1.312, giving up some of its gains earlier this week, when the pair hit seven-month highs on bets that the Conservative party in the U.K., led by Prime Minister Boris Johnson, would likely win a majority of the seats in the General Election.

With a Tory majority, Boris Johnson will likely be able to get his Brexit deal approved, ending the current parliamentary deadlock on Brexit, which has weighed on economic activity.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Never in the History of the Euro Has Volatility Been This Low

© Reuters.  Never in the History of the Euro Has Volatility Been This Low © Reuters. Never in the History of the Euro Has Volatility Been This Low

(Bloomberg) — It has never been this calm in the euro-dollar options market and it’s starting to look like a structural shift toward persistent low volatility.

There were record lows for one- and three-month volatility in the common currency Wednesday, following similar moves in longer tenors at previous sessions. While the expected calm of Christmas holidays may explain the move over the one-month horizon, the trend runs further out and may be becoming the new norm.

The main risk ahead is arguably the U.K. December election, yet demand for protection against price swings created by a market-adverse outcome may be confined to pound crosses only, just as happened with Brexit talks. Globally, fatigue over trade-related headlines may keep ranges tight, even if current optimism over the progress in U.S.-China talks wanes. And data out of the euro area suggest the worst may be behind for the region’s economy.

Explanations vary as to why investors are refraining from taking advantage of record-low hedging costs. They include a range of soothing geopolitical and policy factors, including easing trade tensions, an outlook for steady monetary policy at the European Central Bank and the Federal Reserve as well as fading fears of a global recession. There is also the rising importance of China’s yuan to the global financial system.

Hedge funds that were betting against the move lower in volatility last week have lost heart, closing their positions following a speech by Fed Chairman Jerome Powell on Monday, according to a Europe-based trader who asked not to be identified because he is not authorized to speak publicly. Powell repeated his expectation that interest rates will remain on hold for now.

Risks will return, and with them will come volatility in the major currencies. But as investors look ahead, many of the most likely flashpoints are further out. That includes the U.S. elections in November next year, the December 2020 deadline for the U.K. to strike a trade deal with the European Union. It will also take time for any complete trade deal between U.S. and China to emerge.

In the meantime, the smart money seems to expect a prolonged period of calm.

  • NOTE: Vassilis Karamanis is an FX and rates strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Forex- Pound Rises on Brexit Hope; Euro Flat After Ifo Data 

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Investing.com – Sterling was higher on Monday, amid hopes rose that the Conservative Party will win the upcoming election and the U.K. will leave the European Union as planned.

British Prime Minister Boris Johnson promised to bring a Brexit deal to parliament before Christmas. His Conservative Party leads in opinion polls ahead of the Dec. 12 election.

“The markets are holding on to any sort of positivity we get at the moment,” said Sean MacLean, research strategist at Pepperstone, a brokerage in Melbourne. “We want to keep that momentum going.”

rose 0.4% to 1.2883 as of 4:14 AM ET (9:15 GMT) while fell 0.4% to 0.8553.

was flat at 1.1020 after the German showed that German business confidence rose this month, after the euro zone’s largest economy avoided falling into a recession. The Ifo business climate index rose to , up from 94.7 in October, but the Munich based institute warned that Germany’s manufacturing sector was still stuck in recession.

Meanwhile, trade sensitive currencies gained ground on positive trade deal news. China announced over the weekend that it plans to improve protection for intellectual property rights, which was one of the main sticking points in negotiations with the U.S.

U.S. national security adviser Robert O’Brien also said on Saturday a deal was possible by the end of the year.

The trade-sensitive Australian dollar was up slightly, with rising 0.1% to 0.6791, while gained 0.2% to 0.6420. The fell 0.1% to 7.0349.

Elsewhere, the , which measures the greenback’s strength against a basket of six major currencies, was steady at 98.150.

-Reuters contributed to this report.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Euro Recovery Odds Seen Rising on Signs of Stabilizing Economy

(Bloomberg) — Investors awaiting signs whether the is ready to stage a comeback will be closely watching next week’s regional manufacturing report.

The preliminary data, due next Friday, will help investors bet whether Europe is heading for a more robust recovery, or conclude that recent positive signals were short of the mark. The manufacturing PMI is forecast to reveal a stabilizing economy, with Nomura International Plc reporting wider signs of a recovery that could strengthen the common currency into next year.

The euro is currently hovering near a one-month low at $ 1.1029, while benchmark German bond yields are edging up again after a huge bond rally in the first eight months of the year. Nomura sees the euro trading at $ 1.10 by year-end before rising about 5% to $ 1.16 by the end of December 2020.

“In a recovery the euro tends to outperform,” Nomura strategists including Jordan Rochester said in a note. “The good news is that our broad measure of risk sentiment remains in risk-on territory and leading indicators suggest the slowdown could turn into a recovery.”

To be sure, European bond markets are yet to see a decisive turning point in the economic data and recent moves are being driven by sentiment rather than a definitive trend in fundamentals. The same may be said about the euro, which has largely ignored recent developments, including the news that Germany avoided its first recession in six years.

Bloomberg economists see a brighter outlook for the euro-zone next year, and optimism grew on Tuesday when German investor confidence rose to the highest level in six months. This follows continued positive signs from China, where manufacturing continued to pick up in October with new orders rising at the quickest pace in more than six years.

For further clues about the future in Europe, traders will be tuning in to a speech by European Central Bank President Christine Lagarde next Friday. With markets largely pricing out further easing this year, any dovish signals could encourage bets against the euro. But chances appear low that she will signal any significant deviation from current policy at such an early stage in her tenure. Meanwhile, other members of the governing council have this week signaled the ECB is in no rush to further expand monetary stimulus.

  • Minutes of Mario Draghi’s final meeting as president of the ECB are coming up, and may provide detail of discussions about the composition of asset purchases and any need to adjust the issuer limit
  • Speeches from ECB’s Lagarde and Weidmann in Frankfurt
  • Fed releases minutes from its meeting on Oct. 30; Fed speakers include Mester, Williams (NYSE:) and Kashkari
  • In Sweden, Riksbank deputy governors Ohlsson and Jansson will speak about monetary policy
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Dollar dozes in Asia, euro waits on Lagarde speech

By Wayne Cole

SYDNEY (Reuters) – Major currencies started the week in a quiet mood with a holiday in Tokyo making for thin trading conditions and investors waiting to hear the first official speech from the new head of the European Central Bank later in the session.

The dollar had tried to rally on Friday after U.S. payrolls beat expectations, but was undone by a soft manufacturing survey which left it looking heavy.

The euro started the week firm at $ 1.1168 () as bulls looked to test the October peak of $ 1.1179 and the 200‑day moving average at $ 1.1195.

Against a basket of currencies, the dollar was stuck at 97.226 () having touched a three-month low at 97.107 on Friday. It was now targeting the August trough of 97.033.

The dollar fared a little better on the yen as safe havens fell from fashion, edging up to 108.22 from Friday’s low around 107.87.

Sterling remained well bid at $ 1.2931 , after last month’s rally from $ 1.2200, as investors wagered there was less risk of a hard Brexit now that an election campaign was underway.

The dollar has been under pressure since the Federal Reserve cut rates last Wednesday and left the door open to more if needed, while all but ruling out the risk of a tightening.

“Global policy rates are converging once again at the bottom. That probably means less volatility among currencies as interest rate differentials shrink and the likelihood of any change in policy diminishes,” said Marshall Gittler, an analyst at ACLS Global.

“It’s also likely to mean a weaker USD, CAD, AUD and NZD as these are the currencies with the highest interest rates currently and therefore the greatest leeway to cut rates. This is probably why USD and CAD were the big losers last week.”

Equally, the main gainers last week were the Swedish and Norwegian currencies as interest rates in both countries are seen on hold or even rising in coming months.

Central banks in Australia and the UK hold policy meetings this week and are expected to hold steady, though there is some speculation the Bank of England might drop its tightening bias.

The new head of the European Central Bank (ECB) Christine Lagarde gives her first speech in the role later on Monday and markets assume she will stick with the easy policy script left by Mario Draghi.

There are also at least seven Fed speakers set to speak this week.

Investors are also hanging on the Sino-U.S. trade talks after both sides said they had made progress toward a Phase-1 deal which might be signed sometime this month.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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