US House of Representatives approved the bill to raise the debt ceiling

The US House of Representatives approved the bipartisan bill to raise the debt ceiling by a comfortable majority of 269-161. The currency reaction was extremely muted. EURUSD traded 1.4230-1.4283 and USDJPY 76.88-77.82. Continue reading

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The House postponed its vote

The House postponed its vote on the Boehner plan, first until Thursday night, and then indefinitely. USDJPY fell quite significantly on the headline. During the Asia session, EURUSD traded 1.4281-1.4364 and USDJPY traded 77.46-77.87. Continue reading

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White House and Congress remain deadlocked in talks over the debt ceiling

The RBNZ kept the OCR steady at 2.5%, but pointed to the need for a near-term rate hike. Other than that, there was very little fresh news during the Asia session. The White House and Congress remain deadlocked in talks over the debt ceiling, and there does not appear to be any clear consensus on which deal, if any, has the best chance of being passed before August 2. The plan offered by Speaker Boehner appears to be falling out of favour as the President has suggested it would be vetoed, while the Congressional Budget Office warned that savings would not be as high as claimed. The White House noted that Congress is still expected to act decisively and a message must be sent to the world that “the US pays on time”. Investors are becoming more nervous, with equities leading the way – the S&P was down 2% and Asian equities have followed suit. On the data front, the Fed’s Beige Book showed the US economy slowed in 8 out of the 12 regions. EURUSD traded 1.4330-1.4377 and USDJPY traded 77.73-78.15. Continue reading

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AUD reaches a new High

The US dollar lost more ground to the AUD during the Asia session after Australian Q2 CPI came in well ahead of expectations. As for the US debt ceiling impasse, the rhetoric emanating from Washington suggests that there is still some distance to cover for both sides to reach an agreement, though the market appears inured to the fact that any deal reached at this stage would probably be insufficient to ward off revisiting the issue in a few quarters’ time, if not sooner. White House Chief of Staff Daley said he is confident Congress will work to prevent a default but offered no details on how talks are progressing. On the data front, consumer confidence rebounded but housing figures were soft. EURUSD traded 1.4492-1.4536, and USDJPY 77.70-78.09. Continue reading

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US Debt Ceiling debate on focus

A pair of speeches by US President Obama and House Speaker Boehner showed that there has been no significant convergence of opinion between both camps in the debt ceiling debate. This jolted FX investors into concluding that the risk of a US downgrade and possible default was larger than first supposed, and the dollar sold off across the board. EURUSD traded 1.4358-1.4501 and USDJPY 77.90-78.70. Continue reading

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Moody’s cuts Greece’s sovereign rating

The euro initially weakened after Moody’s cut Greece’s sovereign rating by three notches to Ca, taking it one notch above the lowest possible rating. FX markets had earlier made a volatile start to the week in Asia after the latest round of negotiations on raising the US debt ceiling broke up acrimoniously and, crucially, without agreement over the weekend. EURUSD traded 1.4343-1.4417 and USDJPY 78.12-78.56. Continue reading

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Euro surges post-summit

EURUSD staged a fierce three big-figure rally heading into the North America close as the details of the Eurozone Summit agreement were first leaked and then announced. Continue reading

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EUR Summit Hopes Rise

The euro got a boost during the Asia session after news reports that French President Sarkozy and German Chancellor Merkel had agreed on a joint position regarding a second financial rescue of Greece. In our view, this raises the chances of a determined policy initiative emerging from today’s summit. Continue reading

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The dollar recovers some ground

The dollar recovered some ground against the Swiss franc and the yen on a combination of healthy US data, better corporate earnings and potential progress on the debt ceiling. President Obama warmed to the “Gang of Six” deficit reduction plan and senior lawmakers in the Senate intimated that the measure could pass with relative ease. However, the House is a much tougher proposition and it remains to be seen whether comprehensive legislation can be passed and signed into law before the Aug. 2 deadline. In another sign of the potential consequences of failure to achieve a deal, Moody’s warned that five states could also lose their AAA rating due to their reliance on federal revenue. In the Eurozone, Reuters reported that French President Sarkozy would meet with German Chancellor Merkel ahead of the Thursday EU Summit. On the data front, US housing starts and building permits surprised to the upside. EURUSD traded 1.4109-1.4182 and USDJPY 78.89-79.32. Continue reading

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Gold traded up to a new record high and RBA signalizes a Shift

The market remains in a state of suspended animation given the relative lack of news, the dearth of economic data releases, and the uncertainty around what may emerge from Thursday’s EU summit. Nevertheless there is a palpable sense of foreboding as Spanish and Italian yields continue to climb. The euro staged a modest recovery during the US session, but this is unlikely to last. After all, the upswing only got underway when European sovereign bond markets closed for the evening, which put a temporary stop to the flow of euro negative headlines on the plight of Eurozone sovereign bond markets. In Asia, the minutes of the RBA’s July 5 policy meeting show that the bank has shifted decisively to a neutral policy stance. EURUSD traded in a range of 1.4084-1.4136 and USDJPY 78.97-79.15. Continue reading

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Euro under pressure

EURUSD dropped 80 pips during the Asia session following a barrage of euro-negative newspaper commentary. Some articles expressed concern about European bank exposure to troubled sovereigns, but the majority were of a more general nature, criticising the response of European authorities to date, and raising doubts about the euro’s very survival. EURUSD traded in a range of 1.4052-1.4168 and USDJPY 78.96-79.30. Continue reading

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