Holiday in Europe Keeps Markets Subdued

Holiday in Europe Keeps Markets Subdued

FX price action has been subdued as the long Easter holiday has kept the news flow thin. However, EURUSD did come under selling pressure with the growing indications that deposits in Cyprus banks greater than €100k will be subject to a greater than expected haircut. EURUSD trade was down to 1.2271 (14 week low) before catching a slight bid recovering 1.280 pre-European open.

The USDJPY also came under selling pressure as quarterly Tankan reports and weak Chinese manufacturing PMI disappointed (suggesting a modest recovery rather than acceleration), sending the pair down to 93.78. The soft Tankan report indicated that corporate Japan remains unconvinced that the weak JPY will last. The data also sent the Nikkei down to -2.12%. Gold traded below the $1600 handle for most of the Asian session, as prices have struggled to gain traction after the initial Cyprus induced safe haven rally. With an event filled week we suspect that traders will take an extra day to relax before returning to the markets.

In the G10 the RBA, BoE, ECB and BoJ are all expected to announce rate decisions, while economic data will be released, including US March employment data on Friday. All the while IMF, EU and ECB are working to complete the remaining technical details of the Cyprus bailout plan which should keep risk aversion trades bid. As for today, with a vast majority of Europe still on holiday, trades will have to wait for US ISM manufacturing survey for any volatility.