Intraday Market Thoughts

EUR/CHF Spikes, Yen Eyes Japanese CPI

by Adam Button
May 25, 2012 0:25

EUR/CHF took a 70 pip roundtrip Thursday as a confused jumble of rumors sparked a quick rally that faded as traders couldnt find any evidence of truth in the rumors. The New Zealand dollar was the best performer while the franc lagged. Japanese CPI is the highlight of the Asia-Pacific session. All of Wednesday's Intermarket Insights are remain on track as EURUSD remains near its latest 2-year lows.

EUR/CHF shot higher early in US trading for no apparent reason and the market was abuzz with speculation about intervention. That quickly appeared less likely as the flows seemed to originate from the UK not the Dutch bank that has been bidding at 1.2000 for the SNB.

The next reports pointed to a think tank report that forecast the SNB was preparing to take further action. That was replaced by a rumour that Switzerland was preparing to tax bank deposits. That left market participants scratching their heads about the feasibility of taxing non-resident, non-citizens. In the end, there was no answer and the market was left mulling over the possibility that it was fooled by a fat finger.

The EUR/CHF action spilled over into broad euro buying which sent EUR/USD above 1.2600. Sentiment later to slipped reports suggesting soft Chinese loan demand and a poll that put Syriza at 30% support, a new high for the anti-bailout party.

Later comments from Monti saying more than half of European leaders support Eurobonds stalled the fall at 1.2520.

Economic data was neutral. Initial jobless claims were in-line with the 370K consensus; durable goods orders rose 0.2% compared to +0.5% but the miss was due to prior revisions. Comments from the Feds Dudley were slightly less dovish but he indicated that QE3 would be on the table if the jobs market deteriorated.

The focus now shifts to Japanese CPI. The national CPI for April is expected up 0.4% y/y but down 0.4% ex-food and energy. The Tokyo May CPI is expected down 0.3% y/y. The figures will be released at 2330 in an otherwise quiet Asia-Pacific session.

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