End of Month Flows Tug at Cable

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Market Drivers March 27, 2018
End of Month flows punish cable
Risk FX comes off the highs
Nikkei 2.65% Dax 1.54%
Oil $64/bbl
Gold $1351/oz.
Bitcoin $80000

Europe and Asia:
EUR EZ Consumer Confidence 0.1 vs. 0.1

North America:
No Data

End of month flows was the dominant theme of the day in early European trade today as the movement in EURGBP pushed cable lower by 100 pips in morning London dealing.

There was little fresh event risk to move FX, but the risk on rally that pushed prices to near-term swing highs yesterday ran out of gas by afternoon Asian trade with EURUSD topping out at 1.2476 and cable hitting a top at 1.4250. From then on, the two pair turned lower athough the decline in cable was much more pronounced and end of month settlements between UK and EZ exacerbated the move.

The EURUSD was nudged lower as well by comments from ECB’s Liikanen who hinted that the taper of a QE in September was not a foregone conclusion and that the Governing council reserved the right to extend the program if it saw fit. It’s very doubtful that ECB will extend QE beyond September, but the comments were made in an attempt to jawbone the pair lower – which worked. It’s clear that ECB is uncomfortable the EURUSD above the 1.2500 figure and is trying to stem the rise of the unit through rhetoric. The rise in the exchange rate has definitely created some deflationary pressures in the region, especially in Germany the latest import price data showed a year over year decline of -1.1% which no doubt is creating concerns in Frankfurt.

The North American calendar is barren as well, so FX make take its cue from equity and fixed income markets for rest of day, but unless other capital markets see large moves, the price action for the rest of the day may be contained. Easter week is seasonally a very slow time in the currency market, so consolidation could be the order of the day.

Boris Schlossberg
Managing Director

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