Monday July 11, 2005 - 10:30:35 GMT
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Euro Firms on Better Sentiment
EUR/USD broke through the psychologically important 1.2000 barrier in European trade tonight buoyed by the strong “Yes” EU referendum vote from Luxembourg as well as the unwinding of dollar long positions after Friday’s NFP results. On Friday the Non-Farm Payrolls reported 146K versus expectations of 200K introducing an element of doubt into the dollar bulls thesis that US short-term rates are headed to 4%. If the US economy is unable to generate strong job growth in the next several months, the Fed will be hard pressed to continue its tightening policy. Meanwhile the positive vote out of Luxembourg, though mostly symbolic in nature served to strengthen euro sentiment by suggesting that the idea of European integration may yet be alive.
USD/JPY hovered near the 112.00 figure for most of the night as traders kept a wary eye on oil futures. Hurricane Dennis did not appear to have caused severe damage in the Gulf of Mexico where 40% of US crude production takes place. However, it may take several more days for oil platforms to return to full capacity, pressuring crude supplies further. The USD/JPY has been hampered by the high oil prices as Japan imports over 99% of its crude. If oil continues to hold the $60 handle the yen is unlikely to appreciate, but if it begins a correction USD/JPY may head back towards the 110 level in a correction of its own.
FX Spot Overnight
- EUR breaks above 1.2000 after Luxembourg vote
- JPY at 112.00 as traders eye oil
- GBP at 7450 on short covering bounce
- CHF trades 1.2950 on general dollar weakness
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