USD back to session lows - led by EUR
Traders will be wondering quite what has spurred the aggressive recovery in the EUR after the ECB delivered the 10bp which was widely expected, but also announce a fresh round of QE beginning at the start of November. Following the end of next month, the ECB will be buying bonds to the tune of Eur20bln a month, also announcing that it will introduce a tiering system for negative rates despite clear opposition from some member states.
After the initial EUR/USD bounce - on the 10bp cut (some anticipated 20bps) - the spot rate rallied to 1.1050-60 before selling off as the news of fresh QE filtered through the market. We then pushed back under 1.1000, with losses slowing as we pushed under 1.0950 though we managed to match the highs seen at the start of last week. Since then, however, sellers have failed to hold onto downside, and we have pushed higher, gaining traction through 1.1000 to then go on and pip the 1.1050 level. There is little behind this other than the lack of substantial interest to sell and stay short the EUR and the price action has reflected just that. As a result, we are back above the opening levels on the day, with the passing of event risk prompting further short covering.
As we have seen in the past, the moves based on EUR/USD tend to feed into USD based price action, with Cable the notable gainer as we pressed back into the mid 1.2300's after dipping under 1.2300. USD/JPY is somewhat one on its own, while the commodity-linked currencies led by AUD and CAD have been relatively quiet on the day as short term players focus on the EUR pairs and against the USD, for the most part.