Forex Market Review (European Session) – Euro hits one-year high; sterling jumps on Carney; dollar posts 7-month low

Forex Market Review (European Session) – Euro hits one-year high; sterling jumps on Carney; dollar posts 7-month low

The euro picked up from yesterday’s gains as today’s European session got underway. Its advance was temporarily halted though after anonymous sources out of the European Central Bank made reference to markets overinterpreting the ECB President Mario Draghi’s comments the day before. Investors were also paying close attention to the ECB’s forum in Sintra, Portugal, as major central bank heads, including Bank of England Governor Mark Carney, were participating in a panel discussion. Some remarks by Carney led sterling post gains similar to those recorded by the euro yesterday.

Draghi’s comments yesterday continued to lift the euro during today’s European session, pushing it to the one-year high versus the greenback. However, sources saying that that ECB head did not intend to strike a hawkish tone, but merely communicate that weak inflation ahead should not be of concern, led the single currency tumbling. Specifically, when these ECB sources from individuals who spoke on condition of anonymity became public, euro/dollar fell to 1.1291, its lowest for the day. Before the news, the pair was trading at 1.1374. Euro/dollar managed to recoup its losses afterwards, hitting a fresh high of 1.1390. It last traded a 0.3% up on the day.

Turning to sterling, the currency jumped with the release of BoE Governor’s introductory remarks at the ECB forum in Portugal making reference to “some removal of monetary stimulus” likely becoming “necessary”. Pound/dollar reached a three-week high of 1.2972 following the comments. It was last up more than 1.0% on the day. The British currency also posted gains relative to the euro, more than making up for yesterday’s decline by 0.7%. Euro/pound last traded below the 0.88 handle, while earlier in the day it recorded a seven-and-a-half-month high of 0.8879.

In terms of data, pending home sales out of the US attracted most attention. Those fell 0.8% month-on-month in June, faring worse than the expected 0.8% gain and below the revised drop of 1.7% in May (from -1.3% before). This is the third consecutive month of declines for pending home sales. Versus the yen, the greenback ignored this worse-than-expected data point, posting a modest gain.

The dollar index traded 0.4% down on the day towards the end of the European session, close to the seven-month low of 95.97 it posted today. Dollar/yen was at 112.16. It started the day at 112.36.

In other notable forex market movements today, dollar/loonie hit a four-month low of 1.3049. The pair was last down 1.0% on the day with the Canadian dollar looking set for its third straight day of gains versus its US counterpart. The loonie was helped by hawkish comments by Bank of Canada Governor Stephen Poloz made during the day, which led market participants to revise upwards their expectations for a rate hike by the Bank in July.

Concluding with commodities, the Energy Information Administration’s (EIA) weekly report showed US crude inventories rising by 118,000 barrels in the week to June 23, compared with forecasts for a decrease of 2.6 million barrels. By contrast, gasoline inventories fell by 894,000 barrels. This exceeded the expected decline of 583,000 barrels. WTI oil immediately fell after the report but posted a rebound soon after. It last traded 1.0% up on the day, at $44.70 a barrel. Brent crude was also up 1.0%, at $47.14 a barrel. Turning to gold, the precious metal gained today on the back of dollar weakness. It last traded at $1250.00 an ounce.

Source: Trade Forex with XM.

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