Overnight Forex Wrap: EUR/USD Restored Above 1.2000

EUR/USD has been restored back above 1.2000 after clocking a 1.1993 low during the early phase of the London session.

The low was seen in the wake of remarks by European Central Bank Executive Board member Benoit Coeure, who said that persistent euro strength would bring “undesirable consequences” for the inflation outlook, though follow-through euro selling proved to be limited as his remarks didn’t add much to the guidance already installed by the central bank’s post-policy meeting announcement and press conference last week.

In settling back around 1.2025, the euro is back to near net unchanged levels on the day. Action Economics said that they expect EUR/USD to remain broadly underpinned, with the dollar likely to be more offered than bid as markets assess the economic damage being wrought by Hurricane Irma. Support is at 1.1993-98.

Earlier Forex Movements:

04:20 AM EDT:

EUR/CHF has seen some choppy price action in recent sessions, but the net takeaway is that the cross has been continuing to orbit the 1.1400 level, which has been the case for about a month now. Safe haven demand for the Swiss franc has ebbed and flowed over this period.

Swiss National Bank boss, Thomas Jordan, signalled last week that the central bank remains fully committed to its ultra-accommodative monetary policy settings, saying that he and his colleagues did not know if recent franc weakness, which is desirable from their perspective, would sustain.

Action Economics said that in the scenario that geopolitical tensions ebb back, they would be bullish of EUR/CHF. Assuming the Eurozone economic revival remains on track, which would help quell ECB angst about euro strength, and assuming the ECB commits to quantitative easing policy tapering at some point over the next month or two, they would expect the EUR/CHF to eventually recover to the SNB’s former floor level at 1.2000.

02:28 AM EDT:

The dollar gained while safe haven currencies weakened in early week trade, concomitantly with stock market rallies amid relief that North Korea refrained from conducting a further missile test over the weekend (which had been widely feared heading into the weekend).

USD/JPY and USD/CHF led the way, with both showing gains of more than 0.5% as the London interbank take to their desks. USD/JPY recouped about a half of the losses seen on Thursday and Friday last week in making an intraday peak at 108.56.

USD/CHF saw a similar price action in making a high at 0.9506. The dollar bid also saw EUR/USD pull back, to a low of 1.1998, nearly a big figure under Friday’s 33-month peak at 1.2092. Action Economics said that given the fallout from Hurricane Irma and likely continuation of saber rattling from North Korea, they advise caution, seeing risk of fresh dollar selling.

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