28 July 2016 at 11:29 GMT
Today's trade reflects yesterday's (very) mild hawkish outing by the Federal Open Market Committee, which fell short of expectations and led USD to consolidate.
It also reflects the scramble for positioning ahead of what remains a fairly opaque Bank of Japan meeting overnight. The market has expected significant stimulus since the re-election of prime minister Shinzo Abe, but the exact size and nature of the plan are still unknown, and conflicting reports are legion.
- Germany Preliminary July CPI (1200 GMT)
- US Jun. Trade Balance (1230 GMT)
- US Weekly Initial Jobless Claims (1230 GMT)
- Eurozone ECB’s Coeure to Speak (1800 GMT)
Following yesterday’s FOMC and Durable Goods from US, the USD has been weaker. In the early European session, EURUSD broke above its 200-day moving average at the 1.1074 area and the next interesting levels lie around the 55-day moving average at the 1.1164 area (1.1168 has been a ceiling ever since the Brexit referendum bar one day where it hit 1.1186).
If ranges are expected to continue, then we would prefer to not to see these levels broken. USD strength might be limited ahead of the BoJ tomorrow; USDJPY volatility continues ahead of same.
The pair is resting above 104.62, which is the 38% Fibo level from the rally starting July 8. Despite a good UK GDP yesterday and a weaker USD, GBPUSD is weaker on the day with eyes on the Bank of England next week and possible risk of further easing in wake of the Brexit result.
FX Options volatilities
USDJPY: All focus on the BoJ tomorrow with overnight trading at 57 vol. But aside from the BoJ event, the market is offered.
EURUSD: Vols continue to trade lower in EURUSD. The spot price is kept in a tight range, and vol likely to drop even further.
XAUUSD: Vol coming off a bit in XAU, but there continues to be an interest for XAU calls. We expect that to continue as long as we stay above $1,315/oz in XAUUSD.
European markets opened lower followed quickly by a sharp move higher before drifting negative again. The Euro Stoxx 600 is down 0.35% with industrial and healthcare companies outperforming while banks and energy stocks show weakness.
Credit Suisse surprised the market with a Q2 profit versus an expected loss and improved capital.
Rolls-Royce is up 13.5% after reporting a better than expected H1 profit and savings at the top end of guidance.
Saipem cut its profit guidance for the year on the low oil price, sending its shares 9% lower.
Dialog Semiconductor cut its guidance for 2016 sales and reported a disappointing Q2 profit. The supplier to Apple is down 5%.
In the US we have another busy day of corporate releases including Alphabet, Amazon, CME, Expedia, and Ford.
The replay of our Morning Call can be found here.
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.
Mad dash? The yen is a volatile heading into tonight's BoJ meeting, where traders
are not quite sure what they should be pricing in. Photo: iStock
— Edited by Michael McKenna and Clemens Bomsdorf