Week in FX Europe – German Bond Traders Just As Bewildered As FX Dealers

The past week has more to do with the flight of the Yen rather than the rise of the EUR. The dollar was beaten down during a liquidity fire sale ahead of a QE tempering employment argument release, rather than the market love for a “unionized currency” that was temporarily pushed to test new quarterly highs. The 17-member single currency recent strength has mostly been a direct byproduct of dollar positioning under threat ahead of a highly influential US data point.

Now that the NFP release has come and gone, and an FX market no more the wiser on the Fed tapering QE question front, will surely lead to an volatile summer for most asset classes. Expect investors to find themselves living from one fundamental benchmark to another.

The supposed backbone of Europe, Germany, will hold two bond auctions next week. It comes at a time when the Euro-zone bond market is being heavily influenced by the “possible timing and speed of the Fed’s plan to scale down its bond-buying program.” Last Friday’s US employment results should make taking down the auctions a wee bit easier. The total German sales will be €16- billion. To date, Bund yields have bee rising since the end of last month, mostly on the back of Fed members implying that it was considering reducing its bond purchase.

Also next week, the ECB pledge to buy bonds under the OMT program comes under German constitutional scrutiny on Tuesday, a day after what historically is the quietest trading day of the month – the first working session after NFP (investors will want to lick their wounds and figure out the Fed’s next possible move). Do not expect any German constitutional decision ahead of September’s federal elections.


* CNY New Yuan Loans
* JPY Bank of Japan Monetary Policy Statement
* JPY Bank of Japan Rate Decision
* JPY BOJ Target Rate
* GBP Gross Domestic Product Estimate
* NZD Reserve Bank of New Zealand Rate Decision
* AUD Unemployment Rate
* AUD Employment Change
* EUR ECB Publishes Monthly Report
* USD Advance Retail Sales
* JPY Bank of Japan May 21-22 meeting minutes
* USD U. of Michigan Confidence

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell