Europe

• EUR/JPY- Today’s money maker was the EUR/JPY pair. Starting the day at a low of 161.54, it hit a high of 163.48 a few minutes past 12PM (ET) marking almost a two hundred pip movement. The ECB’s Trichet gave the euro some strength by pledging “strong vigilance” toward inflation this morning. After leaving the 4% rate untouched today, markets interpreted his comments as signal for a rate increase at the central bank’s next meeting. It’s important to watch whether this pair’s momentum will continue with an upward trend toward last week’s levels.
• The carry trade looks good again- Gaining nearly 200 pips, the pair to trade today was the EUR/JPY. It marked a reversal in the unwinding carry trade of the past week. A few factors are responsible. This weekend’s voting results showed the prime minister’s party lost a majority in the upper house election for Japan. Also, interest rate futures have shifted to expectations toward a pause during the central bank’s August meeting. Weaker economic data is responsible for this. And if world financial markets keep with less volatility, this trend may continue.