FX Market Summary 10-25-2013: Dollar limps into the weekend

EUR/USD initially held steady during the Asian session on Friday before pushing higher once again with a move to fresh 2013 highs just above 1.3830 as the dollar remained generally vulnerable.

The German IFO business confidence index was slightly weaker than expected with a dip to 107.4 for October from 107.7 previously following five consecutive monthly increases. There was some market disappointment surrounding the releases, although it was still historically buoyant.

There were also reports from ECB sources that the central bank had important reservations surrounding any move to negative interest rates. Nevertheless, it was still a possibility and a repo rate cut could be considered if there was a further decline in inflation.

Markets remained uneasy surrounding the risk of more aggressive ECB verbal intervention to deter any further Euro gains and this was important in curbing buying at current levels, especially as money-supply data remained weak. The Euro continued its resilient tone despite these reservations with any small retreat quickly attracting buying interest.

There was a stronger than expected headline US durable goods orders report with a 3.7% increase for September, but the underlying figure was weaker and failed to provide any dollar traction. Similarly, there was a small downward revision to the University of Michigan consumer confidence index to the lowest level since December 2012.

Position adjustment dominated in US trading with generally narrow ranges prevailing. The dollar again struggled to make more than a limited correction in new York with EUR/USD holding above 1.3750 while USD/JPY was capped below 97.50 after finding support near 97.00.

The latest UK GDP data met expectations with a 0.8% flash estimate of growth for the third quarter following a 0.7% advance previously as the services sector moved above the pre-2008 peak for the first time. Although Sterling made a fresh push higher following the data, the release had been priced in and was not strong enough to trigger any fresh support. GBP/USD again failed to break above the 1.6250 area and dipped back below 1.62.

The Canadian dollar remained out of favour with USD/CAD testing resistance above 1.0450 and the Australian dollar was also generally vulnerable as AUD/USD tested support below 0.96.

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