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Forex: Euro New York Summary

Posted by Joseph Trevisani on Oct 14, 2013 4:59:00 PM

The euro opened New York at 1.3559 (8:00 am) mid-way in the narrow 1.3546-69 Asian-European range.

Comments in the European session from ECB Council member Josef Bonnici, head of the central bank of Malta, that the ECB was ready, if necessary, to start charging banks for their deposits, a policy known as negative interest rates, and would be a strong drag on the euro, were offset by stronger than expected EMU August industrial production figures ( m/m 1.0% vs. 0.8%, y/y -2.1% vs. -2.5%).

U.S. credit markets were closed for the Columbus Day holiday but equities were trading. The Dow opened down 100 points despite the many reports of deal making in the government debt limit and shutdown dispute in Washington. Just after the open the euro broke 1.3570, the intra-day high had been 1.3569, and driving on stop executions reached 1.3588 in ten minutes and 1.3598 in twenty. But once again the offers at 1.3600 blocked the path higher. As we have noted previously, except for two days early this month October 3rd and 4th, when the united currency touched 1.3646 and 1.3632, and two days in February the 1st and 2nd at 1.3711 and 1.3660, the euro has not been above 1.3600 since November 2011.

Dollar sentiment then began to improve as reports out of D.C. said that Senators Reid and McConnell, the Majority and Minority leaders were still in talks and that a deal was possible, some said expected, within 24 hours.

Stocks reversed, the Dow finished 64 points higher, and  the euro began a steady, if limited fall into the close (5:00 pm), shedding roughly 10 points an hour closing at 1.3558, one point from where it opened nine hours earlier. The dollar was also helped by reports that Reid was quoted that he was optimistic an agreement could be reached this week, presumably before the Thursday deadline when the Treasury Department has said the government will run out of money.

Ewald Nowotny, ECB council member and President of the National Bank of Austria, may have given the dollar a late boost when he said that the dollar will remain the world's reserve currency for a long time, because "there are no markets with this degree of liquidity" in a speech at Columbia University in New York City.

The main focus of the currency markets, as with credit and equities, is the debt negotiation in the American capital.  Until that is concluded with an increase in the debt limit, markets will be extremely sensitive to the vagaries of the negotiations and the reporting.

 

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Chart: Bloomberg

ScreenHunter 1915 Oct. 14 19.03

 

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