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FOREX: EURJPY Posts Sharp 1% Reversal Lower as Political Risks Linger

FOREX
  • The Euro has been under pressure in late trade on Thursday, following the broader risk-off tone, with particular sensitivity in French assets (CAC-40 underperforming, French/German spreads widening, and French banking names trading particularly softly; Credit Agricole, Societe Generale lower by 2-3%) being noted. 
  • EUR/JPY has reversed well off highs, with the cross now over 1% below the prior session highs and the cross now pressing on the week’s lows at 168.30.
  • No fresh news catalyst, but the pessimistic theme and uncertainty surrounding French politics clearly pervades - while not new news, Macron's approval rating falling to a fresh six-year low (24% according to the latest poll published in Les Echos) adds to the weight.
  • Broad based single currency weakness is evident with the likes of EURUSD and EURCHF both registering 0.65% declines on the day.
  • Lower-than-expected US PPI appeared to bolster the softer US price data this week, however, this was offset by the slight to quality in G10 FX. As such, the USD index stands 0.55% in the green as we approach the APAC crossover.
  • In emerging markets, there was a notable weakening for the Colombian peso with USDCOP rallying around 2.5% and taking the week’s advance close to 5%. A mixture of domestic fiscal concerns, the recent global unwinding of carry trades and softer oil prices have all been weighing on the peso.
  • Focus Friday turns to the Bank of Japan decision and then the preliminary read of UMich sentiment and inflation expectations data.
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