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China’s decision to bring up the banking reserve ratio by 50 basis points established an early risk-averse tone for markets however the worries did not last and markets ended up whippy and directionless through the rest of the day. The pound sterling and New Zealand dollar were the top performers whilst the Swiss franc and Japanese yen lagged.
Sentiment got better immediately after a report displaying that U.S. initial jobless claims dropped to the lowest since July. First-time claims for jobless benefits fell to 435K from 450K in the week finishing Nov. 6. The U.S. dollar climbed to the highest in a month versus the yen immediately after the report but afterwards gave back a big portion of its gains.
A U.S. bond auction delivered ripples through the market. The sale of $16 billion in 30-year bonds was very much weaker than anticipated. The market was looking forward to 4.275% but the issue sold at 4.320%. The almost five basis point miss is one of the worst, if not the worst in the previous 5 years in the long bond. A round of volatility struck the market following the auction as market participants utilized the bond weakness as a buying opportunity. What was at first a dollar positive, transformed into a dollar negative and assisted the euro rally of more than one hundred basis points from its lows.
Concern concerning Ireland has been harming the euro and Irish borrowing fees climbed for the twelfth sequential day. At one stage during the session, Irish 10-year yields climbed by more than 60 basis points. That forced the EUR/USD to a one-month low however bargain purchasing of Irish bonds paying 9% per year helped reverse the trade as did comforting responses from Irish central bank Governor Patrick Honohan.
Be aware that November 11 is a holiday in North America, the UK and parts of Europe so the data calendar is light and market liquidity will be thin. Anticipate to see choppy trading following potentially large moves in the data-heavy Asia-Pacific session. Content provided by AroundFX.com.
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