Home More euro support

The euro is coming under some pressure early on during the European trading session, but this follows from what has been a relatively strong performance, which saw EURUSD push more than 2 year highs at the end of last week. There have been two principle drivers to this move. Firstly, the ECB last week gave no strong indications that further easing was on the cards at their monthly press conference. Secondly, the depreciation of the Chinese yuan has seen the euro benefit on the perception that the central bank is shifting reserves away from the dollar.

Now, we cannot know this for certain, because the PBOC don’t publish data on reserves to that level of detail. But other signs, such as large reduction of US government bond holdings by China in the latest official US data, suggest something along these lines is taking place. There have been other periods when the euro has benefited from such reserve diversification moves. Being the second most liquid currency after the dollar, it is not that surprising to see the euro benefit and if China continues to push its currency lower, this could easily provide further support for the single currency.

Besides the euro, the overnight session has been relatively muted. We’ve see the Aussie regain its balance from an earlier wobble on weaker than expected business confidence data and there were no surprises from the latest Bank of Japan meeting, where the current pace of QE was kept in place ahead of the consumption tax increase next month which is expected to see growth correct lower. USDJPY remains pretty range bound, but taking into account the above, EURJPY is looking far more interesting, with potential to move back to the year-end highs just above 145.00 should the current drivers of euro strength remain in play.

Further reading:

Investors turn to safe havens after shock China trade deficit

UK Manufacturing Production rises 0.4% – GBP/USD makes a dead cat bounce

FxPro - Forex Broker

FxPro - Forex Broker

Forex Broker FxPro is an international Forex Broker. FxPro is an award-winning online broker, offering CFDs on forex, futures, indices, shares, spot metals and energies, serving clients in more than 150 countries worldwide. FxPro offers execution with no-dealing-desk intervention and maintains a client-centric business model that puts customer needs at the forefront of our operations. Our acquisition of leading spot FX aggregator, Quotix, enables us to offer access to a deep pool of liquidity, as well as top-class order-matching and some of the most competitive spreads in the market. FxPro is one of only few brokers offering Negative Balance Protection, ensuring that clients cannot lose more than their overall investment. FxPro UK Limited is authorised and regulated by the Financial Conduct Authority (registration number: 509956). FxPro Financial Services Limited is authorised and regulated by the Cyprus Securities and Exchange Commission (licence number: 078/07) and by the South Africa Financial Services Board (authorisation number 45052). Risk Warning: Trading CFDs involves significant risk of loss.