Majors Muddle Sideways Against US Dollar Volumes

Trading was light in the overnight as volumes declined across Europe, suggesting that many market participants remain on the sidelines during the summer doldrums. Indeed, such soft trading conditions have led to volatility dropping to historic lows, which although has typically meant a relief in financial stresses on the horizon and thus a risk-friendly environment, little upside progress has been made by risk-sensitive currencies such as the Australian and New Zealand Dollars or by the Euro over the past several days.

As noted yesterday, “in part, the Euro’s advance today has been aided by modest improvements in peripheral European sovereign debt yields; each day that bond yields don’t spike higher should be considered bullish for the Euro, even if yields move sideways,” and the same holds true today. The Italian 2-year note yield has dipped to 3.384% (3.5-bps) while the Spanish 2-year note yield has inched higher to 4.108% (+3.9-bps). Similarly, the Italian 10-year note yield has fallen to 5.843% (-3.2-bps) while the Spanish 10-year note yield has fallen to 6.744% (-3.9-bps); lower yields imply higher prices.

RELATIVE PERFORMANCE (versus USD): 10:42 GMT

EUR: +0.23%
CHF:+0.23%
AUD:+0.14%
GBP:+0.13%
NZD:+0.04%
CAD:-0.02%
JPY: -0.28%