Risk currencies make advances in US trade

The Singapore dollar was no exception, says IG Markets Singapore.

IG Markets Singapore said:

As China stimulus hopes were raised and Spanish debt fears eased risk currencies made advances in US trade.

The SGD was no exception, having spent most of the Asian session trading either side of 1.23 against the Greenback, we saw an advance overnight moving us closer to 1.225 level.

With the main focus remaining on Europe, mixed data out of the US last night with a GDP revision lower and an improvement in jobless claims did nothing to support the USD.

With traders likely to remain focused on Spain for the coming sessions we are more likely to be guided by general risk appetite towards risk currencies rather than any local issues.

With the mixed bag of US data there are few clues for traders looking at next week’s likely movements.

DBS Group Research meanwhile noted:

EUR/USD bounced off its 200-day moving average, currently around 1.2824 this morning, on Spain announcing more government spending cuts and tax increases. This comes ahead of the release of an audit report on its banks today that will determine how much financial assistance can draw from its bank bailout program.

Just less than a fortnight ago, EUR/USD failed to follow through on its rally after the Fed’s QE3 announcement. EUR/USD tried twice to break above its 300-day moving average just above the 1.31 level, and failed on worries that the struggling EU nations lacked the political will to complement the European Central Bank’s (ECB) bond purchase plan – the Outright Monetary Transaction (OMT) Scheme –with austerity and reforms.

The market also wants to see stronger support from German lawmakers for the ECB’s strategy to help resolve the crisis. October 24 has been set as the date for ECB President Mario Draghi to explain his bond buying plan to the German parliament. This will be an important event because Bundesbank President Jens Weidmann was the sole dissenter of the bond plan.

If German lawmakers stand strongly behind their central bank chief, this will signal greater resistance towards further EU integration and little chance to boost the European Stability Mechanism. Against this background, EUR/USD will probably be hesitant to reclaim its psychological 1.30 level, and may instead settle into a 1.25- 1.30 range in the coming month.