Intraday Market Thoughts

Yen Retraces, France Downgrade Rumors Shot Down

by Ashraf Laidi
Jan 8, 2013 23:15

Talk of a French downgrade was later denied as the euro traded close to 1.3080. The yen was the top performer while the pound sterling lagged. The Asia-Pacific session features Australian retail sales. 12 new trades in tonight's Premium Insights are added. Please see the Premium, Section for access.

The euro fell to the lows of the day at 1.3056 after a rumor that France had been notified of a downgrade swirled through markets. The rumor was quickly shot down by French officials but the kneejerk may have been in the wrong direction as Ashraf pointed out that euro has recently closed higher after downgrades.

Chatter about the yen was more lasting. Initial reports that the BOJ would consider easing and introducing a 2% inflation target later this month helped USD/JPY rebound from 87.00 to 87.35. A separate story said that if the BOJ introduces an inflation target it may not have a time attached, which would effectively water it down. A later round of USD/JPY selling knocked the pair as low as 86.91.

The yen crosses suffered worse with GBP/JPY particularly hard hit below 139.50 – more than 250 pips from yesterday's highs.

The top event on the Asia-Pacific calendar is the December Australian retail sales report. The consensus is for a 0.3% rise after a flat reading the month before.

The Australian dollar has struggled to hold gains above 1.05 in recent days, failing on six separate attempts to hold above the psychological barrier. The speculative market is long AUD but there is talk of sovereign demand below 1.0470 so the tight range could continue.

Act Exp Prev GMT
Retail Sales (NOV) (m/m)
0.4% 0.0% Jan 09 0:30
Retail Sales (m/m)
0.1% 0.3% -0.7% Jan 08 10:00

Latest IMTs