EUR/USD Stable Ahead Of FOMC

EUR/USD

After a lacklustre European session, with the pair trading either side of the 1.2700 handle, stronger price action was again dictated by US data. The US durable goods numbers missed expectations (the headline number at -1.3% vs. Exp. 0.5%), with the USD seeing notable weakness as a result. This meant upside for the EUR, and the pair spiked from 1.2708 to 1.2760, eventually printing a high at 1.2765. The pair came off these high somewhat as the session moved closer to the close on little fundamental, almost retracing its initial strength, yet EUR/USD stabilized around the 1.2730 level. Looking ahead to the seminal FOMC rate decision tomorrow where all analysts are expecting the FOMC to taper and finish QE3.

EUR/SEK

The Riksbank’s surprise 25 bps cut to their repo rate, to 0.00%, was the most notable event of the European session. 19 out of 20 analysts had been expecting a 15 bps cut, with one expecting no movement from the Swedish central bank, and as such SEK weakened significantly to a 4-month low vs. EUR and a 4-year low vs. USD. The move was exacerbated by comments from the central bank regarding too low inflation and the likelihood of rate staying low into 2015 and 2016. The move higher in EUR/SEK constituted over 700 pips at the release of the decision, as the pair broke through several handles from 9.2500 up to 9.3400, and further upside seen. Looking ahead tomorrow sees Swedish consumer confidence data, however participants are also likely to continue to speculate about the Riksbanks’ (and also the Norges Bank) rate path.

USD/JPY

The price action for the pair, which had been characterized by the USD’s strength from early European trade onwards, was strongly reversed on the weaker-than-expected US data which pulled USD/JPY off its highs of 108.17 and led the pair to print session lows well below the 108.00 handle at 107.70. Since this low print the pair has made a determined effort to regain its position, reaching 108.14. Ahead of the US USD 29bln U.S. 2-Year auction US yields have been falling consequently offering some reprieve for the USD. The pair moves into the European close trading around the 108.00 handle, awaiting the FOMC rate decision tomorrow and the BoJ’s rate decision on Friday.