Article / 10 April 2017 at 11:28 GMT

Mid-session Europe: Dollar bolstered on simmering tensions

Saxo Markets
Denmark

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Foreign exchange
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Whatever we are to make of that nonfarm payrolls print Friday, dollar has managed to swerve any repercussions as the simmering geopolitical landscape has kept the US currency buoyed. Donald Trump's game-changing intervention in Syria and jostling on the Korean peninsula has reshaped the paradigm and markets now wait to see if the military option is a permanent fixture in his policy artillery.

EURUSD could be the one to watch as is edges closer to 1.0550 and not even an upside surprise in the Eurozone April Sentix Investor Confidence survey at 23.9 versus 21.0 expected was able to lift the common currency out of the doldrums. Federal Reserve chair Janet Yellen speaks tonight and while she rarely rocks the boat, nerves are such that rhetoric and tone will be watched in equal measure.

Watchlist

  • US Fed Chair Yellen to speak (2000 GMT)
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Forex developments

USD index maintained strength over the weekend, trading in the 101-101.25 range as geopolitical tensions remained elevated. Descending resistance, well-seen on daily charts (currently at 101.4) may add technical pressure on the greenback. EURUSD is well below 1.06 at a current 1.058, a 0.1% on-day slide.

USDJPY has seen noticeable rejection at above 111.50 to a recent 111.20. Yen is supported by Japan's balance of payments with the current account beating the estimates (T JPY 2.184 vs 2.608e). The trade balance is at the highest in several years.

GBPUSD found support at 1.236, adding circa 0.2% during the session. The 50-day EMA at 1.24-1.241, however, remains unbreached.

FX Options volatilities
 
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The French election and terror are the two main themes prevailing. Volatility in the 1-month segment continues to trade bid and euro downside especially is in demand. 1-month 25 delta risk reversal is now trading 3.85% favouring the downside, which is the highest level for the last five years. The very front end is offered. 1-week EURUSD is trading 6.25% or around 73 pips and with Easter approaching together with low historic volatility in all majors, the front end will continue to trade offered. Other markets ares looking to buy medium-term Vega with Vix trading higher so we could see curves higher next week.

Fixed income
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Commodities

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Equities

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European markets sway between gains and losses on light volume as investors keep a close eye on the geopolitical landscape. Basic materials and healthcare cling onto gains whilst consumer staples is perform poorly.

Barclays made the news this morning after announcing it will make “a very significant” adjustment to the CEO’s compensation. The company are reprimanding chief executive Jes Staley for his efforts to unmask a whistle-blower. The FCA and PRA have launched a probe into Barclays and Staley over the incident.

Stada in Germany is trading 11% higher after supporting a joint takeover offer from Bain Capital and Cinven Group.

Activist investor Elliot Advisors drove BHP Billiton higher by over 4.5% after urging the company to undertake a plan to unlock shareholder value. 

Fresenius in Germany confirmed on Friday evening that it was in talks to acquire Akorn in the US. Akorn is trading 12% higher pre-market after having closed 18% higher on Friday.

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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.





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Geopolitical risk is the backdrop with North Korea in view. Photo: Shutterstock

— Edited by Martin O'Rourke

The Global Sales Trading desk is a multi-asset team providing customised trading solutions

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