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Euro to face challenge of TLTRO

Yesterday saw further profit talking in the dollar with USDJPY dipping back to the mid 118 area, now sitting figure bid at the time of writing and EURUSD is recovering not far off the 1.2500 level. The long dollar trade has become quite a crowed one now and is susceptible to further profit taking, in particular if rate hike expectations by the Fed are pushed back further and further. US treasury yields have dipped significantly since spiking following last Friday’s spectacular non-farm payrolls as concerns over the global picture continue to increase. Oil’s one way ticket seems to have no target destination as crude prices just keep on falling and the more it fall’s the more worried central banks will become about deflationary pressures.

More focus will be put on the Yen as we approach this week end’s Japanese election which looks like a foregone conclusion. Considering what the result is expected to be the recent move in USDJPY has taken many by surprise as an Abe victory could lead to his reform agenda being ramped up a notch but wider concerns over growth and the ability of the Abe / BOJ measures to actually turn the Japanese economy around are causing investors to pause for breath on the USDJPY trade.

Overnight the Aussie has seen a bit of buying interest in the light of unemployment data which showed an employment change higher than expected so AUDUSD has moved back above the 0.8300 level.

But the main event for today is the TLTRO results due out at 10.15 GMT which are expected to range from €90b to as much as €250b with consensus around the €150b mark. The reaction from the euro is hard to predict as either a higher or lower result could lead to euro weakness as traders could see the recent strength in EURUSD as a selling opportunity. Shortly after this it is worth noting that the Russian central bank makes an interest rate decision with the market expecting a hike to 10.5% as the CBR attempts to halt the decline of the Rouble after USDRUB hit yet another all-time high just below 55.00. US retails sales will also be monitored at 13.30 GMT which are expected to rise 0.3%.

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