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Euro in New York

Posted by Joseph Trevisani on Sep 16, 2014 4:09:00 PM

The euro opened at 1.2950 for U.S. trading (8:30 am) mid-point in its 1.2923-67 range from Tokyo and London. The pair has been penned in a 1.2860-1.2995 range for eight days and is not likely to move far before tomorrow's FOMC statement at 2:00 pm.

The Federal Reserve is expected to make another $10 billion reduction in its monthly securities purchases bringing them to $15 billion and to end the program entirely at its October 28th and 29th meeting. There is no expectation for any change in the Fed Funds rate which has been at 0.25 % for more than five years.  There has been speculation that the Fed Chair, Janet Yellen, might hint at a faster approach for normalizing interest rates, but yesterday's poor industrial production and capacity utilization may have put a damper on that. 

The German ZEW survey for September though considerably weaker than forecast with the current reading at its lowest level since August last year, (current situation 25.4 vs. forecast 40.0, August 44.3; expectations 6.9 vs forecast 5.0, August 8.6) had minimal impact on the united currency, evincing a small 8 point drop, 1.2947-1.2939.

New York morning trading was confined to a 1.2936-55 range as PPI for August at 8:30 am came in exactly in line with predictions (0.0% m/m, 0.1% core m/m, 1.8% y/y, 1.8% core y/y). The euro did angle down a small amount with the top coming early and the low just before the London close at noon.

Remarks from Francois Hollande, the French Prime Minister, that they must go further in bringing down the euro and that Europe faces the worrying prospect of deflation probably aided the slide in the euro but comments along these lines have become commonplace from European government and central bank officials. 

A report that the People's Bank of China had added liquidity to the banking system ignited a sharp bout of short covering about 30 minutes before the London close bringing the euro from 1.2937 to 1.2984 before dropping back to 1.2959 10 minutes after London had departed.

A comment from Jon Hilsenrath of the Wall Street Journal in an interview at the Journal, that the Fed may keep the phrase a "considerable time" in the FOMC statement indicating when it might begin to raise rates gave the euro another boost to the day's high at 1.2995 and belied the idea that the Fed may begin to give flesh to the speculative bones about its pending change in rate policy.

There was no attempt to penetrate 1.3000, the top lasted but two minutes and the euro quickly subsided to 1.2980 then 1.2970, where it spent much of the afternoon slipping late to 1.2960 and closing.

WorldWideMarkets

eur min sept 16 

 

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