Euro continues recovery against USD

Monday, April 27, 2015

The euro continued to strengthen against the dollar this morning after posting gains towards the end of last week as signs that the euro is back on the way up encouraged market participants back into the single currency. Further moves higher have been halted by tentative resistance at the 50 day MA bringing at temporary halt to the 1.5% rise in the euro against the USD, currently trading around 1.0875, however, the outlook for the euro is steadily improving as the ECB boost demand for eurozone stocks as QE continues to improve liquidity conditions in the region. The euro has found firm support towards 1.0500 in recent months and should we see the single currency revisit this level in the coming weeks we are confident that investors will take advantage of the buying opportunity. Resistance around 1.1000 has prevented any significant breakouts higher but improving demand for eurozone stocks will improve demand for the euro and potentially see a breakout higher.

Interest rate swaps in China dropped to a multi-year low as a growing number of market participants anticipated the central bank to introduce additional measures in an effort to help support the economy. The rate on 1-year, onshore interest rate swaps fell to its lowest level in 33-months towards 2.56% as hopes the PBOC would intervene to alleviate the building stresses of debt saw the cost to hedge against rising interest rates drop further, having come down substantially from the year-to-date peak of 3.83% seen in mid-March. With the PBOC increasingly focusing on improving market liquidity as it attempts to prop up economic growth we could see additional support in the coming weeks with the upcoming municipal bond sale potentially benefiting from central bank support.

Asian benchmark indices extended gains, starting the week on a strong footing, tracking the gains on Wall Street after Friday’s bullish US data pushed US equity indices higher. Durable goods orders surged 4.0% in March, smashing expectations of a modest 0.6% increase as investors seemed well placed to benefit from further bullish news with earnings season well under way. Despite the release of weaker Chinese data, with industrial profits down -0.4% y/y in March, major indices across Asia were encouraged by a combination of anticipated central bank support and a stronger US economy. 

EUR recovery against USD pushes away from parity

EUR Curncy Euro Spot Daily 27 2015 04 27 07 42 21

1-year IRS cost falls on speculation of continued PBOC support

CCSWO1 Curncy CNY IRS 7D REPO 2015 04 27 07 48 41

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