Euro Finds it Easy on the Upside
The idea that the ECB will wait-and-see on its latest easing maneuvers is nothing new but headlines saying that gave the euro a lift. On the day the Swiss franc was tops while the Aussie lagged. The RBA meeting minutes are up next.
How a market reacts to news is often more important than the news itself. Bloomberg cited two unnamed Eurozone central bank officials in a story saying the ECB will refrain from any new measures in the “coming months” as they assess the impact of the latest moves.
That should come as no surprise, the first TLTRO isn't due until September and the bank review will come later. ECB officials have also been very clear that QE was still in the discussion stage.
In any case, the euro jumped to 1.3579 from 1.3530 on the headlines. That might show more reluctance to break 1.35 than anything else. Monday's fall to 1.3513 was the third test of the level in the past two weeks and the bears are beginning to lose patience.
In a similar situation, cable managed to break 1.70 as we warned yesterday but the high was 1.7011 and then it was a quick trip back down to 1.6980.
In both cases, it's tough to judge if there is a real lack of enthusiasm in the market of if the onset of summer and the World Cup are taking some of the energy from the market.
Another spot to watch in the day ahead might be the precious metals complex. Gold and silver were both down on a day when the US dollar was mostly weaker. June seasonals are very week, especially for silver, but gold and silver are bucking the trend so far this month with gold up 1.8% and silver up 4.5%.
The Asia-Pacific session in the day ahead isn't particularly action packed but one spoke to watch is the 0130 GMT release of the June RBA minutes. Expect some anti-AUD jawboning but any optimism about the economy or worry about inflation pressures will dominate.
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