European session FX pre-open

By Francisco Miñana

Date: Wednesday 04 Jul 2012

This is a foreign exchange (forex) market update at the European session pre-open.

Main headlines:

IMF warns of ‘downside risks’ to US - FT

Draghi’s Giant Leap On Rates May Be Small Step For Euro - Bloomberg

Bank of England Implicated in LIBOR Row - Bloomberg

Barclays' Diamond Faces Grilling in Parliament - CNBC

Commodity-Currencies’ Forecasts for Year-End Are Reduced by Morgan Stanley - Bloomberg

Could Gold Hit $6000? Analyst Thinks So - Bloomberg

Americas wrap up:

Dark economic clouds gather anew over Obama campaign - Reuters

US Needs to Deal With 'Fiscal Cliff' Soon: IMF's Lagarde - CNBC

Factory Orders Rise Three Times What Analysts Expected - CNBC

Canada Dollar Advances as Crude Oil Climbs, Risk-Asset Demand Increases - Bloomberg

Apple Plans Smaller IPad to Compete With Nexus - Bloomberg

Clinton’s ’Sorry’ Helps Reopen Pakistan Routes - Bloomberg

Mexico's president-elect may double security spending - Reuters

Peru clash over Newmont mine kills three - Reuters

Mexico's Slim not eyeing more Europe buys for now - Reuters

Asia wrap up:

Asian Stocks, Korean Won Rise on Stimulus Hopes - Bloomberg

Australia Market Hits 7-Week High - WSJ

Yuan Advances on Growth Optimism as US Factory Orders Climb - Bloomberg

China Needs to Ease One-Child Policy - Bloomberg

Australia Retail Sales Rise More Than Forecast - Bloomberg

Reactor restarts, but Japan energy policy in flux - Reuters

Weak Rupee Forces Indians to Cut Back on Travel Plans - CNBC

European preview:

Euro Options Show a Year More of Pain on Record Flow - Bloomberg

Diamond Exit Raises Speculation of Bank Split - Bloomberg

Martin Wolf: A Eurozone step in the right direction - FT

King Succession Race for BOE Roiled Over LIBOR - Bloomberg

Portugal PM tells unemployed to look abroad - FT

Spanish Aid May Flow Straight to Banks - WSJ

Iceland Minister Pushes for EU Entry - WSJ

Forex action

EUR: The euro crosses trade sideways on the day before the long awaited European Central Bank (ECB) meeting in Frankfurt in which interest rates could be cut by 25 basis points. Yesterday’s production prices help the ECB to be more doveish in its monetary policy stance. We expect a close call between an interest rate reduction and no action. EUR-USD dips a little bit below 1.2600. EUR-JPY trades now at 100.35.

GBP: The sterling crosses follow the side steps of the euro. The Bank of England (BOE) is in the headlines amidst allegations of being implicated in the LIBOR scandal. Tomorrow the market expects that the Monetary Policy Committee could increase its asset purchase programme helping to restart the engines of a sluggish UK economy. Cable moves below 1.5700 resistance, while GBP-JPY trades under 125. EUR-GBP rises towards 0.8040.

CHF: Few changes in the Swiss trades despite reduced risk aversion in the Eurozone. EUR-CHF is in the familiar range close to the floor set at 1.2000 that the SNB is willing to defend. USD-CHF holds close to 0.9550.

CAD, AUD & NZD: The three dollars consolidate after reaching recent monthly highs against the USD and the JPY. AUD-USD retraces after testing the 1.03 resistance zone. Meanwhile, USD-CAD is on its way towards the parity zone. Pay close attention to the 1.0120 support area.

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