Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 16 June 2016 at 23:48 GMT

US Market Wrap: Frothy FX markets end close to unchanged

FX Consultant / IFXA Ltd


  • Nothing of note
US Data released:

  • Jobless Claims (Actual 277,000 vs. forecast 270,000)
  • CPI -May (Actual 0.2% vs forecast 0.3%, ex food and energy 0.2% vs forecast 0.2%, m/m)
  • Philadelphia Fed Manufacturing Index (Actual 4.7 vs forecast 0)

What a day for FX markets. The differences between the New York open and close weren’t very much but that masks a very volatile trading session. EURUSD opened at 1.1250 and sank to 1.1133 by mid-morning. Sterling had a similar fate.  It opened at 1.4176 and hit 1.4010. USDJPY sank from 104.40 to 103.71

And suddenly, risk-off became risk-on. The entire morning losses were recouped by mid-afternoon.  There were a lot of guesses but no real answers to explain the change of heart. Guesses included;  that the morning USD strength was overdone, Brexit leave odds had diminished, the Federal Reserve has lost its way, and the US economic rally may be over. Or all of the above.

Mark Carney’ s speech was cancelled due to the murder of UK politician, Jo Cox.

Oil prices plunged. Fears of Brexit generated turmoil if Britain leaves the EU and bearish technicals drove WTI down from $47.50 to a low of $45.90. The Canadian dollar ignored the WTI decline and rallied alongside the other G10 currencies.

US equity markets opened with a sour tone but that changed mid-morning when the US dollar started to fall against the G10, allowing the major indices to close with a small gain.

xxx Showing resilience: The Canadian dollar shrugged off weaker oil prices overnight. Photo:iStock

Are you getting Fed up with the world's central bankers?TradingFloor contributor Ken Veksler explains the frustrations in his piece Sack all the central bankers

-- Edited by Adam Courtenay

Michael O'Neill is an FX consultant at IFXA Ltd. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.

Missed a day? Here’s what we had to say during our Asian session and our regular European Morning Markets, From the Floor and Mid-session Europe.

16 June
I just wonder how oil, gold and USD can fall dramatic toghether and generate a big plus in the indexes, Something is rotten in the kingdom of .......
Or in the markets IT systems, because everything works totally wrong now
18 June
fxtime fxtime
IL....having just read your comment the correlation between oil and gold is often weak...the $index as a measure of purchasing power is a usable measure but in relation to crude again the deliverable near contracts and roll periods will distort the pricing. The rollover advance periods seem out of synch to expiry dates but occur at the most liquid points in the near dated contracts but appears as if they are wrong. Google hedgehogging....some contract rolls are so large and the liquidity depth is mammoth that it affects the pricing inversely akin to your description of appearing ''wrong''.


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