With two thirds of the FX dealing world closed for Good Friday holiday, currencies spent a very quiet night of trade reacting primarily to better equity flows out of Japan which saw the Nikkei rise by 222 points.
â€¢ Japanese Yen: tries a run to 100 on better equity flows
â€¢ Euro: Better bid as risk appetite resumes
â€¢ Pound: very quiet in holiday trade
â€¢ Canadian Dollar: Markets closed for Good Friday
â€¢ US Dollar: Markets closed for Good Friday
With two thirds of the FX dealing world closed for Good Friday holiday, currencies spent a very quiet night of trade reacting primarily to better equity flows out of Japan which saw the Nikkei rise by 222 points. The rise in the Nikkei generated some buying interest in EURJPY which popped to 154.00 taking the euro up along for the ride. However, the trading was very thin and without much conviction as the vast majority of market players retired for a three day week-end.
On the economic front both French and Italian consumer spending surprised to the upside, with the French reports registering a very strong gain of 1.2% vs. 0.5% projected. The increase was due to better demand for cars and durable goods and indicates that the strong euro is enhancing the purchasing power of EZ consumers and may provide some positive contribution to GDP growth this quarter.
Overall, however, the market appears at a standstill as EURUSD consolidates its gain in the 1.5300-1.5500 area and traders wait for the next theme to develop. The collapse of Bear Stearns has left the market wary, but with no additional news of serious trouble in the US financial system, dollar shorts have run out of fresh reasons to sell the greenback. Meanwhile evidence of a potential slowdown in EZ economy is starting to mount, raising concerns that ECB may have to shift its hawkish posture relatively soon.
Next weekâ€™s IFO survey may set the tone for trade, especially if it corroborate euro bearâ€™s argument and prints lower than expectations. The pair is clearly overbought and a correction all the way to 1.50 may not be unreasonable, especially if US economic news stabilizes while European data deteriorates.
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To discuss this article please contact Boris Schlossberg, Senior Curency Strategist: [email protected]