The Swiss franc retreated today after jumping yesterday on risk aversion, but retained most of its gains. Additionally, the currency advanced versus the yen, against which it fell yesterday.
Forex traders were not in mood to risk and preferred safer assets. Negative data from China and the eurozone added to concerns caused by speculations that the Federal Reserve may tamper its quantitative easing program.
Safe currencies rallied on the pessimistic mood of traders. The yen was rallying, but erased most of its gains on the previous trading session and fell on today’s session. The franc is still in danger as the Swiss National Bank is willing to contain the exchange rate, but the overseas news was playing in favor of the Swiss currency.
USD/CHF was at 0.9705 as of 1:31 GMT today after dropping from 0.9780 to 0.9684 yesterday. EUR/CHF declined from 1.2575 to 1.2525 before trading at 1.2533. CHF/JPY was up from 105.26 to 105.55.
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The eurozone continues to show weak data readings, and many expect the recession in the eurozone to last through the rest of the year. However, even so, the euro is still gaining against the US dollar. Even with the current “risk off” environment, euro is heading higher.
The latest Purchasing Managers’ Composite index reading from Markit shows that a rise from 46.9 to 47.7 is being seen for May. However, even though there is a rise, the index is still solidly in contraction mode. The eurozone is considered to be in contraction until it reaches the 50.0 level.
Germany appears to be stagnating, and France continues to struggle.
Even with this news, the euro is gaining against the US dollar today. Some think that it might be more of an indication of dollar weakness than of euro strength. However, if the ECB decides to make more drastic moves to boost the eurozone economy, things could change and the euro could weaken.
For now, though, euro is higher, even though there is a bit of a ”risk off” feeling today with stocks lower and other risk assets out of favor.
At 14:37 GMT EUR/USD is up to 1.2908 from the open at 1.2858. EUR/GBP is up to 0.8562 from the open at 0.8544. EUR/JPY is down to 131.1860 from the open at 132.6450.
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Canadian dollar is experiencing very choppy trading today, moving between gains and losses against major counterparts as traders and investors try to figure out what to do next.
Yesterday, markets rallied following Federal Reserve Chair Ben Bernanke‘s testimony before Congress. Today, though, there is a different mood, with Chinese manufacturing reports indicating a contraction, and news out of the eurozone indicating continued recession.
Even so, there is a strange mix of demand for risk assets along with an aversion to them. Stocks are plunging around the world, particularly in Asia and Europe. Additionally, oil prices are much lower. These lower oil prices should normally bring the loonie down against the greenback, but instead the Canadian dollar is higher against its US counterpart right now.
Wild swings in the markets are reflecting in the Canadian dollar performance, which swings from gains to losses as traders try to figure out what all the economic data, plus rumors of the Fed tapering its easing program ahead of schedule, could mean for markets.
At 15:03 GMT USD/CAD is lower at 1.0345, down from the open at 1.0368. EUR/CAD is up to 1.3352 from the open at 1.3331. GBP/CAD is at 1.5585, down from the open at 1.5603. CAD/JPY is down to 98.0995 from the open at 99.5010.
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Euro is gaining ground today, heading higher as Ben Bernanke’s testimony to Congress gets under way. Expectations of loose monetary policy in the United States are helping the euro today.
Even though Federal Reserve Chair Ben Bernanke is likely to share optimism about the economy while testifying before Congress, there are enough doubts about inflation and the speed of the economic recovery that the loose monetary policy is expected to continue.
While the ECB has cut rates, and may cut rates again, the eurozone has yet to engage in quantitative easing, so the euro remains somewhat strong against the dollar. Euro is also strong against the UK pound, thanks in large part to the disappointing retail sales data out of the United Kingdom.
So, even though credit agencies are warning that there could be more downgrades for debt-ridden eurozone countries, the euro is still retaining some of its strength today. Indeed, there is also an element of risk appetite helping the situation, since stocks are heading higher and there seems to be a demand for riskier assets. Gold is also gaining, which helps EUR/USD.
At 14:17 GMT EUR/USD is up to 1.2980 from the open at 1.2905. EUR/GBP is up to 0.8582 from the open at 0.8515. EUR/JPY is up to 133.5020 from the open at 132.2895.
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Hopes for the UK economy are driving the UK pound higher, especially against the US dollar, today. Rising home prices are providing optimism that the UK economy is improving, and that is reflected in sterling gains today.
The latest home prices news is in, and it appears that asking prices for homes in the United Kingdom rose by 2.1 per cent in May. This brings the total increase for the year so far to 9.1 per cent. On top of that, the recently weak pound has boosted exports, and that’s helping the economy as well.
Indeed, this good news about the UK economy was followed up by Mervyn King commenting about a ”modest recovery” in the United Kingdom during a broadcast. The Bank of England still needs to do more to promote growth, he pointed out, but things are moving in the right direction.
The good news is helping the UK pound against the US dollar, which is struggling ahead of Ben Bernanke‘s testimony before the US Congress later this week. Pound is also gaining slightly against the euro, which continues to struggle against some currencies due to continued turmoil in the eurozone.
At 15:38 GMT GBP/USD is up to 1.5224 from the open at 1.5192. EUR/GBP is down to 0.8450 from the open at 0.8054. GBP/JPY is lower, dropping to 156.0405 from the open at 156.1250.
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The Swiss franc gained yesterday and remained little-changed today against the US dollar and the euro even as economic expectations were worsening. The currency traded sideways versus the Japanese yen.
The ZEW-CS Indicator of economic expectations for Switzerland sank as much as 17.8 points to 2.2 in May. The report said that “last month’s significant gains are lost and the indicator falls back to the level of March 2013″. Meanwhile, the Swiss Producer Price Index ticked up 0.2 percent in April.
Fritz Zurbruegg, Member of the Swiss National Bank Governing Board, said in an interview to L’Hebdo newspaper yesterday about the cap on the franc:
The floor rate will remain in force as long as necessary to carry out our mandate of maintaining price stability. The current exchange rate still seems overvalued.
USD/CHF fell from 0.9668 to 0.9646 yesterday (falling from the high of 0.9746 — the highest since August 20) before trading at 0.9654 as of 00:12 GMT today. EUR/CHF was at 1.2429 after dropping from 1.2489 to 1.2430. CHF/JPY was flat at 105.84.
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The Canadian dollar gained against the euro and the US dollar as macroeconomic data from the eurozone and the United States was bad. The currency was flat versus the Japanese yen.
US industrial production fell 0.5 percent in April after rising 0.3 percent in March. The Producer Price Index edged down 0.7 percent last month. The negative reports led to talks that the Federal Reserve will maintain its monetary stimulus.
The news from Europe was not good either. It is interesting to see that the Canadian currency maintained strength even amid negative fundamental data.
USD/CAD was down from 1.0178 to 1.0163 as of 23:01 GMT today after rising to 1.0218. EUR/CAD dropped from 1.3149 to 1.3088, while CAD/JPY was almost unchanged at 100.56.
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Earlier News About the Canadian Dollar:
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The Chinese yuan strengthened today as China’s trade balance improved, beating analysts’ forecasts, and the central bank increased its daily fixing to the record high.
The People’s Bank of China set its reference rate 0.17 percent higher to the record of 6.1980 per dollar. The Customs General Administration of China reported that the trade surplus was at $ 18.2 billion in April, above the forecast of $ 15.5 billion. Exports surged 14.7 percent last month from a year ago, beating the expectations of 9.2 percent.
USD/CNY fell from 6.1588 to 6.1460 as of 14:11 GMT today, while the daily high was at 6.1699.
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Earlier News About the Chinese Yuan:
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Euro is gaining ground today, heading higher as an ECB rate cut seems further off after German economic data. Also helping the euro is general risk appetite following Chinese data.
The latest news out of Germany has many hoping that the eurozone’s biggest economy can pull the entire region out of its current funk. Better than expected industrial output is driving this hope. Even though Mario Draghi recently spoke of the possibility of ECB rate cuts in the future, many think that this news out of Germany pushes off the possibility for a little while longer.
Also helping the euro today is a rise in gold prices, as well as optimism about the global economy, due to improved data out of China.
There are still concerns about the eurozone, though. Many remain on bailout watch for Slovenia, and a slump following the housing bubble in the Netherlands could prompt a eurozone exit. Worries about the overall stability of the eurozone continue to simmer beneath the surface, even though there is a lot of enthusiasm right now.
At 16:29 GMT EUR/USD is up to 1.3179 from the open at 1.3078. EUR/GBP is up to 0.8469 from the open at 0.8446. EUR/JPY is up to 130.2425 from the open at 127.4750.
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The Great Britain pound advanced today on speculations that the recent string of positive reports will encourage the Bank of England to refrain from adding to monetary stimulus on tomorrow’s meeting. The currency went down against the euro.
The BoE will conduct its policy meeting on May 9. Analysts expect no changes to the policy. The recent data suggested that the economic situation in the United Kingdom is changing, making it prudent for the central bank to wait and see what steps are necessary to facilitate growth of the economy.
Today’s data was mixed. On one hand, the Halifax House Price Index rose 1.1 percent in April, much more than analysts have predicted (0.2 percent). On the other, British Retail Consortium Retail Sales Monitor turned down 2.2 percent last month from a year ago.
GBP/USD went up from 1.5482 to 1.5536 as of 20:39 GMT today and its daily high was at 1.5590. GBP/JPY advanced from 153.26 to 153.78. At the same time, EUR/GBP edged higher from 0.8444 to 0.8466, reaching 0.8488 intraday.
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