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Market Review:
Euro, Swissy, Aussie, Outlook
In a daily market review with TheLFB trade team, Dan Cook, Snr Market Analyst at IG Markets, looks at the impact of global trade on the euro, swissy and aussie pairs.
EUR/USD – The Euro and Dollar saw some fairly large swings since the opening of this weeks trade; however, this pair currently resides right around Friday’s closing levels as neither side has gained a clear advantage. There has been really very little in the form of economic indicators or news to really drive either side and instead the price action looks like a market that is trying to balance itself out as we head into the New Year.
There are a lot of unanswered economic questions that will most certainly not be resolved until well into 2010 and with the Dollar’s appreciation through December it will be interesting to see how much upside, if any is left for the greenback.
USD/CHF – There was some extremely interesting price action regarding the Swissy versus both the Dollar and Euro overnight. While the net result has been basically unchanged prices from Friday’s closing levels in both pairs, a sudden and rapid depreciation in the Franc this morning led many to speculate that once again the Swiss National Bank (SNB) was directly intervening in the currency markets to lower the value of their currency.
While neither the SNB nor the Bank for International Settlements would comment on the surprisingly large CHF sell-order, currency traders have already voiced their verdict. Seeming to back up the thought that this spike down for the Swissy was brought on by central bank intervention, in their Quarterly Bulletin, the SNB stated that they would do whatever it takes to ensure that they stave off deflationary pressures and would provide all the liquidity necessary to make sure that this happens.
AUD/USD – The Aussie has been under a great deal of price pressure from the USD since the markets re-opened yesterday. A large reason for the drop in Aussie value was an article in the newspaper “The Australian” which concluded that the Reserve Bank may have rushed in raising interest rates.
The article went on to state “…although Australia’s economic performance has certainly been remarkable compared with that of its peers, it remains in the grip of a serious economic downturn and highly reliant on government stimulus spending to achieve growth at all.” While things still appear considerably better in the Australian economy than elsewhere in the world, it appears that their decision makers may have been a bit too optimistic and overshot the mark on this one. Even so though, the 3.75% rate still seems accommodative when compared to the 7.25% seen in 2008.