18 January 2001, 10:55  Europe FX Opening: Summary of overnight moves and what's ahead

By Bridge News
London--Jan. 18--The following is a summary of overnight moves since Europe's close, plus possible leaders for the session ahead:
KEY ISSUES:
*USD/JPY hits new 18-month high after O'Neill backs strong USD.
*LDP stocks panel meets. JPY hit by talk it might ask BOJ for quantitative easing of monetary policy.
*California energy crisis deepens as blackouts hit one million.
*ECB expected to leave interest rates unchanged.
*Euro group finance ministers meet tonight. ECB's Duisenberg, Noyer attend
*UK December retail sales Q4 BCC survey eyed for rate clues.
A strong recovery in USD/JPY in late European/US trading on Wednesday, with more gains in Asia spilled over into the EUR crosses, helping EUR/JPY pull EUR/USD higher and reversing what was looking like an impressive USD/Europe bounce. The o/n moves also reverse USD gains that really took a hold following low US CPI data Wed and US Treasury Secretary designate O'Neill's reiteration of strong USD policy. USD/JPY could not hold the best of its gains, however, and led the way back down again Asian as well, falling back as the Nikkei rose and the Japanese government held the first of what will be daily meetings to discuss measures to prop up weak Japanese equities and possibly the JPY.
--USD/JPY pushed to an 18 month high of 119.90 in late US trading, led by buying from US names plus stop loss and option related bids. The pair ran into profit taking as the Asian session began, however, and slipped to the 118.75 region as Japanese equities rose ahead of the LDP meeting on stock measures.
The Nikkei ended the day up 206 points. The LDP's stock boosting committee did not discuss the use of public funds, but chairman Aizawa said it would be "a natural topic for discussion." He noted, however, that there is opposition within the LDP to the use of public funds. Reports late in Europe Wed that LDP's Aizawa would pressure the BOJ to re-adopt quantitive easing also helped push the JPY lower.
--EUR/JPY bounced from Wednesday's 109.03 low to hit 112.28 as the Asian session got under way, but dipped back to the 111.30 region as USD/JPY pulled back.
--EUR/USD was carried higher as EUR/JPY rose, firming from the 0.9288 European low to hit 0.9393 around the Asian midday. The jury is still out, however, on whether this week's USD recovery has further to go. Evidence it should came Wed, when it shrugged off a larger than expected slump in Dec industrial production.
Thursday sees the release of Italian CPI data at 0800 GMT plus the possible release of revised German November manufacturing orders data. German finance minister Eichel speaks at 1000 GMT while French finance minister Fabius speaks again at 1530 GMT. The ECB meets today, though no change is expected. The Eurogroup meets in Brussels later tonight and chair Reynders will hold a presser early Fri following a bilateral with Duisenberg.
Thursday is an active day for Swedish data and events, including December unemployment and money supply data, plus Finance Minister Ringholm's appearance before a parliamentary committee at 1115 GMT.
--EUR/GBP was pulled off Wednesday's 0.6305 low to hit 0.6370 in the Asian afternoon, while cable firmed gently to the 1.4755 region. UK retail sales data for December is released at 0930 GMT.

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