Euro and Japanese Yen Mixed on the Citigroup News

Euro-US Dollar (EUR/USD) was unable to break above morning highs, in the wake of the Citigroup bail-out with afternoon gains stalling at 1.2655, the high made in early Asian trading. The market is seen cautious of establishing new positions ahead of German Ifo data today, with business confidence tipped to fall to a five-year low. Euro-Zone current account data is also due for release, along with industrial orders. After the poor PMI data on Friday, expectations are increasing for further weak economic data. Offers remain at higher levels of 1.2700 with bids at 1.2480, 1.2400 and 1.2380.

Meanwhile, Dollar-Yen (USD/JPY) edged above 95.50 briefly on the Citigroup news, but has been unable to sustain gains so far, edging back to 95.38. USD-JPY remains well below the highs above 96.00 this morning and the forex market may be waiting for the European reaction to the news. More details are emerging, with Citigroup management to remain intact and with the Treasury announcing that the Treasury and FDIC will protect against losses up to $306 bln. DJIA futures are up 72 pts and this is helping support USD-JPY and JPY crosses. Offers on USD-JPY remain at 96.25.

BoE's Bean said the MPC should take credit and asset prices into account when setting monetary policy, in a speech over the weekend. "Given the potential costs of a bust, it would therefore appear to be wise to use monetary policy to try to prevent the build-up of the imbalances in the first place. Note that this is not going so far as to advocate targeting asset prices." "But it does at least justify 'leaning against the wind’ during the upswing phase of a credit/asset price boom in order to moderate the boom and thus also the prospective fallout from any subsequent bust." Meanwhile, British Pounds bounced to 1.4960 after the Citi news, but there was no follow-through on the currency moves, GBP/USD could not break the highs seen in the morning and now trade at 1.4870.

DailyFX

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