NEWS / Foreign Exchange

EUR/USD looks up

• Treasuries digesting post-payrolls sell-off
• European bonds fall to new recent lows in late Payrolls reaction
• EUR/USD looks up
• Financial markets after the US payrolls

Last Friday the dollar received a boost with the better than expected payrolls report. As the report showed a jobs growth of 180K, the EUR/USD pair was brought down from the 1.34 zone (test of the recent highs) to the1.33??™s.

But the impact was all in all very much contained, seeing the dollar overbought conditions. This morning, it all turned sour again for the USD. EUR/USD is again on the rise and shot up back to the 1.34 mark.

This anti-dollar sentiment seems to stem from USD/JPY where traders are very nervous over the upcoming G7 meeting, as there could be yen positive/dollar negative remarks in the run-up. (see USD/JPY part below for details), but even so that seems a very thin argument, as the movement in USD/JPY is very small.

We were already sceptical of the dollar for some time, so the view has to be maintained that this is a sell-USD-into-strength environment, especially in this current pro-euro sentiment (across the board??¦). If wrong, we would stop-loss though should EUR/USD slip below 1.3260.

Today, not so much is on the calendar, with French industrial production and some Fed speakers to be watched.

USD/JPY rose to fresh recent highs at the 119+ zone in the aftermath of the US payrolls report last Friday These gains were kept on Monday, but now some downward pressure is seen.

The Bank of Japan announced its rate decision this morning. As expected, the Bank kept o hold at 0.50% policy rate. The market is more interested to shear what the BoJ members have to say. Fukui is expected to speak this morning.

On Wednesday (08.00 CET) the two newcomers to the BoJ (Kamezaki and Nakamura) will speak up and this may be very interesting as very little is known about their monetary stance. This could be market moving.

This morning, the USD/JPY pair was seen moving lower. To some analysts this was linked to some nervousness over the upcoming G7 meeting this weekend and some potential yen positive remarks.

This seems a bit overstretched. We feel it is rather clear that the G7 will not single out the yen. In February, there were mostly EMU voices in the debate, but so far, those have been calm, not to say muted, and unlikely to start shouting. They were whistled back last time around and don??™t want to stick out their necks again so soon. At the time the issue was also linked with the Japanese monetary policy, but since the Bank of Japan has hiked, the heat is off the issue for at least a while, even if the yen is standing at even weaker levels??¦

Last week, the Bank of England failed to hike, as some did speculate, and ever since, sentiment has again been a bit more questioning the sterling. EUR/GBP in this fashion turned back up from the 0.6770 zone to the 0.6810-20 zone.

We do have some questions regarding this sterling skepticism. The Bank of England can still hike and in our opinion is to be expected to do so at the very next chance it gets!

The ECB may be seen a bit too hawkish, as risks may be skewed that the Bank may stop sooner than expected by the markets at this stage, so 4.00% could be seen a decent pause point for now. That would imply that the upside for EUR/GBP remains limited and we should continue to believe in a buy sterling-on-dips attitude for the longer term.

In the short term this hasn??™t worked at all though we have to admit. But there is no denying that the UK indicators are still going strong and this should be of an ultimate support for the sterling at some point and we feel this point is coming closer.