There is a sense that FX markets are coasting into year end, with one or two exceptions. The Aussie we talked about yesterday, with reference to its ability to defy gravity in the face of the greater nervousness surrounding China. But the Swissie is also worth noting as we move into quarter end. We’ve seen around a 0.7% reversal in EURCHF from the lows seen in the middle of March around the 1.2120 area, now nudging above 1.22. Naturally, some of the uncertainties surrounding the Ukraine and less so China have had an impact, but the SNB’s continued pledge to defend the 1.20 level, repeated by the SNB President a week ago, have served to make the yen the preferred safe haven during the second half of March.
For today, the final reading on US Q4 GDP and UK retail sales will be the main distractions, together with the usual weekly claims data in the US. The dollar is receiving a modest bid at the start of the European session, mostly at the expense of the euro and the yen. Banks try their best to anticipate the effect of month end flows on currency movements as asset managers adjust hedges to compensate for monthly asset market performance. There has been some talk that this will be positive for the yen going into month end, with the euro weaker on the back of the strong performance of a strong performance from Eurozone bonds. Overall though, the message is beware of greater volatility Friday and Monday.