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Forex: New York Euro Summary

Posted by Joseph Trevisani on Jan 14, 2014 5:15:00 PM

The euro opened at 1.3672 after a 1.3648-98 range in Asia and Europe.

The only substantial movement had been generated by Ewald Nowotny ECB governing council member and president of the Austria National Bank who said that EMU economic growth could exceed expectations this year. "There is even potential on the upside," said Mr. Nowotny in a speech in Vienna today.

The euro shot up almost 140 points in about 15 minutes, from 1.3660 to 1.3799 following his comments and generally stayed above the take-off point for the rest of the session in Europe and the United States.  The euro improvement came despite opposite comments last week form ECB President Mario Draghi who said that the outlook for the EMU "continues to be on the downside." The ECB expects 1.1% growth in the eurozone this year.

The euro stopped just short of the sell orders at 1.3700, quickly subsided to 1.3676 and followed with a dip to 1.3663 shy of the level where the Nowotny run began.

Good U.S. December retail sales numbers (0.2% vs. expected 0.1%), though tempered by negative revisions to November (0.4% from 0.7%) were enough to push the euro to its New York low at 1.3659, but the euro soon bounced back to 1.3676. One more drop to 1.3660 was all the sellers could manage and the inability to clear the European low at 1.3549 reversed intra-day sentiment with the New York high of 1.3690 following at 11:00 am.

Treasury rates had been rising from the US open, though not sharply,  and that may have influenced the currency markets as the euro then saw a sharp fall to 1.3672. The 10-year yield eventually traded up to 2.87% in the late afternoon after having opened at 2.84% and been as low as 2.82% in Asia.

But then a quote from ECB President Mario Draghi that government debt held to maturity will not be marketed to market on bank's balance sheets lifted the euro back to 1.3689. Strengthening US rates again nipped the euro rally bringing the currency back to 1.3671, one brief surge to 1.3684 and the market closed at 1.3679.

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