FX consolidates as white flags are raised
City Index July 12, 2013 2:06 PM
<p>The FX markets are consolidating, with the euro trading at the midpoint of the 1.2750-1.3200 range this week after the dollar’s demise following Fed Chairman […]</p>
The FX markets are consolidating, with the euro trading at the midpoint of the 1.2750-1.3200 range this week after the dollar’s demise following Fed Chairman Bernanke’s comment in early Asia on Thursday. The FOMC minutes to me were slightly bearish but let’s remember these minutes were taken before the stellar jobs report of last Friday that has the six-month NFP average at 200k. Bernanke emphasised that if financial conditions tighten to the level where the Fed’s dual mandate is in question, they will push back on any tapering. This for me takes us back to scrutinising US data as reiterated by all the Fed members since the last FOMC, with the standard line being ‘tapering asset purchases is far from tightening’. The timing of these comments came as early Asia arrived at their desks where liquidity is at premium. Hence as I look at the reaction to these comments in other markets (equities/bonds) I note that the reaction in FX seems very much overdone. That said this move just shows how long the market was the dollar but from here I’m not ruling out a move to 1.33,96.30 and 1.53 in the majors from a plain prospective on positions.