1) commodity currencies are weak as the global growth outlook deteriorates;
2) EUR is strong, as market participants continue to square positioning ahead of event risk;
3) the non-EUR, European currencies of NOK, SEK and GBP are mid-performers, benefitting from building hope for Europe.
Beyond Jackson Hole, the focus today has been on French PM Hollande’s meeting with Spanish PM Rajoy, helping to fuel speculation that Spain is one step closer to requesting aid. Chancellor Merkel’s visit to China and Premier Wen’s comments, that he is more confident after meeting with Chancellor Merkel, have proven vaguely EUR positive. Meanwhile, US politics continue to be the headline, while hurricane Isaac has been downgraded to a tropical storm and taken some pressure off of oil prices.
Building inflationary pressures will complicate the decisions by the ECB and are likely to intensify the German/ECB discussions. Yesterday, German CPI came in above expectations at 0.3%m/m and 2.2%y/y; while today Spain’s preliminary CPI jumped to a nine-month high of 2.7%y/y.
German unemployment rose for the fifth month in a row; however on a year-to-date basis unemployment is only down 11k, virtually flat; while the unemployment rate has been absolutely steady at its 20-year low of 6.8% since December 2011.
EUR/USD was trading at 1.2510, up 0.03% at time of writing. The pair was likely to find support at 1.2466, Tuesday’s low, and resistance at 1.2576, Tuesday’s high.
Meanwhile, the Euro was up against the British Pound and down against the Japanese Yen, with EUR/GBP gaining 0.02% to hit 0.7924 and EUR/JPY falling 0.04% to hit 98.30.
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