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Euro in New York

Posted by Joseph Trevisani on Sep 17, 2014 5:00:00 PM

The euro-dollar opened at 1.2958 once again mid-way in the Tokyo/London range as markets waited for the FOMC statement at 2:00 pm on the East coast.

U.S. CPI for August at 8:30 am was considerably weaker than forecast (-0.2% vs. 0.0% July 0.1%, core 0.0% vs. 0.2% July 0.1%, y/y 1.7% vs 1.9% July 2.0%, core 1.7% vs. 1.9% July 1.9%). It was the first negative print since  April 2013. The euro spiked 15 points to 1.2973 in the first minute, making it to 1.2981 five minutes later. 

Offers were plentiful above 1.2980 and within five minutes the euro traded back to 1.2970. The rate then drifted lower finding temporary support  at 1.2967 which broke just after 9:00 am and the pair slipped steadily down to 1.2953 where buyers provided a base and a small bounce. 

A better than forecast NAHB housing index at 10:15 am was ignored and the euro rose to 1.2970. But led by dollar/yen demand the euro soon faded slipping to 1.2938  its low up until then. It recovered to 1.2964, skidded to 1.2951  and was trading at 1.2960 going into the Fed announcement at 2:00 pm.  

The FOMC statement generated immediate volatlity. The euro flew up to 1.2979 and then collapsed to 1.2913 within a minute of the release and fled to 1.2898 within five minutes.

The statement retained the phrase 'considerable time"  in reference to low rates, and that seemed to have been the initial focus, but the overall policy remained intact, with QE ending at the next meeting.  

The market then changed direction and rallied to 1.2958 but that was the last effort  for the euro and again egged on by dollar/yen the euro  drifted  down to 1.2920 where it traaded for about 30 minutes.  

A steep decline began just below the prior low at 1.2913 and steady selling took the euro to its daily low at 1.2952 at about 3:45 pm.  It bounced as high at 1.2977 in the late afternoon but the close at 1.2865 just off at the 2014 low of 1.2960 indicated further weakness ahead. 


Chart: Bloomberg

eur close min sept 17


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