By Christopher Vecchio, Currency Analyst for DailyFX.com
Price action has been mostly mixed on Thursday though trading in the
pre-North American hours has resulted in a modest push upwards by high
beta currencies and risk-correlated assets, led by declines by the
Japanese Yen and the US Dollar. The optimism is mostly European-centric,
with the Euro leading, followed closely by the British Pound and the
Swiss Franc, despite the fact that equity markets remain skewed lower
and Italian and Spanish bond yields have inched higher the past few
hours.
The main event on today’s docket is the European Central Bank Rate
Decision, although no new efforts are expected to be set forth. Instead,
we are looking to President Mario Draghi’s press conference, which
could offer new insight into the conditions necessary to take part of
the Outright Monetary Transactions (OMTs), the bond-buying program
designed to work hand-in-hand with the European Stability Mechanism
(ESM) to stem the crisis.
Any commentary suggesting that the ECB remains prepared to act or
rhetoric that suggests the 2013 budget set forth by Spain is sufficient
for the ECB will be largely supportive of the Euro and high beta
currencies. In fact, given the stall by many of the major pairs –
AUDUSD, EURUSD, GBPUSD – at critical support, optimism spurred by the
ECB could provoke a solid bounce ahead of tomorrow’s crucial US Nonfarm
Payrolls report for September.
Taking a look at credit, peripheral European bond yields are mixed
but higher, despite the Euro’s strength. The Italian 2-year note yield
has increased to 2.197% (+4.7-bps) while the Spanish 2-year note yield
has increased to 3.161% (+4.6-bps). Likewise, the Italian 10-year note
yield has decreased to 5.067% (-1.8-bps) while the Spanish 10-year note
yield has increased to 5.786% (+3.0-bps); higher yields imply lower
prices.
RELATIVE PERFORMANCE (versus USD): 10:42 GMT
EUR: +0.33%
CHF:+0.28%
GBP:+0.26%
CAD:+0.18%
NZD:+0.10%
AUD:+0.03%
JPY: -0.09%
