Euro Holds Around 4-Month High Ahead Of ECB Decision
EUR/USD rose as much as 0.3% to 1.0820, the highest since Nov. 7, before paring gains to 0.1%. Bund futures fell, pushing up bond yields from Japan to Australia
The euro was supported by a series of repricing and short-covering in both spot and options, according to an Asia-based forex trader. The bias in 1-month risk reversals is now in favor of the euro for the first time since September
Traders are now eyeing the European Central Bank’s decision later on Thursday, where it is widely expected to cut its deposit rate by 25 basis points to 2.5%. Also on the radar of traders is a meeting between EU leaders on a military aid package for Ukraine
“The market was short euro-dollar on tariff expectations and was surprised by the German news,” said Saurabh Tandon, global head of foreign-exchange options at Standard Chartered Bank in Singapore
“Since then we have seen a lot of interest in buying topside protection mainly through shorter options and some medium-term topside demand through call spreads and digitals.”
The Bloomberg Dollar Spot Index was little changed after a 1% decline on Wednesday
Treasury yields rose across the curve with the 10-year gaining four basis points to 4.32%
USD/JPY edged up 0.1% to 149.08
Japan’s largest labor union federation, Rengo, is expected to announce average wage demands among its members
AUD/USD was little changed at 0.6337
GBP/USD was steady at 1.2900
Some of the information came from a forex trader with knowledge of the transaction who asked not to be identified because the person was not authorized to speak publicly
Source: Bloomberg
