EUR/USD: Corporate seen buying dips

Traders report a European corporate is buying EUR/USD on the dips toward the 1.2800 level, absorbing some decent-sized spec selling.

Why would a European company buy its own currency? Most likely to repatriate profits earned abroad…

Turnover is relatively high today within a 50 pip range in EUR/USD. Looks as though folks want to take care of business before tomorrow’s NFP sends the market spasmodic…

EUR/USD trades now at 1.2815.

Cable takes aim on stops below 1.5350

Traders report stop-loss sell orders not far below present levels…

Pending home sales rise 5.2%; Factory orders rise 0.1%

June factory orders revised higher, to -0.6%.

Yields are rising further and equities are firming as the data is okay, not dreadful.

US 10-year notes are up to 2.63%

A few quick flows…

Solid buying in USD/CHF…

Real money buys more USD/JPY….

Swiss names buys USD/CAD…

EUR/USD unable to maintain gains

EUR/USD’s pop to fresh session highs at 1.2848 turned out to be very short-lived. Traders apparently took the shift to the ECB using a floating rather than fixed rates on its three-month liquidity operations as a sign the ECB was laying the ground work for a hike, at some stage. Trichet quickly poured cold water on that idea, saying the move had no message for monetary policy attached.

German banks were among the heavies sellers near the highs, traders report.

We dipped as low as 1.2810 to shakeout weak longs and trade now at 1.2825. 1.2775/1.2850 range-trade prevails for the near-term…

Trichet passes on opportunity to scold Weber

Bundesbank president Weber has made a few controversial remarks in the last few months, essentially pre-announcing today’s move to extend liquidity provisions as well as public opposing ECB bond buying. The press gave Trichet the opportunity to put the Bundesbank chief in his place but Trichet passed on the opportunity…He did say he was appalled by the comments of Bundesbank board member Sarrazin and has full confidence in the Bundesbank’s response to them.

Trichet: We see no double-dip

Based on recent data, Trichet says the ECB sees no double-dip recession.

Interestingly, the change in policy on liquidity provision was not unanimous among ECB board members. The decision was taken by consensus, Trichet says.

In juggling liquidity programs, no rate signal: Trichet

The ECB has slightly modified the way it provides liquidity support to banks but Trichet insists that the moves in no way signal any future changes in monetary policy.

EUR/USD has eased from 1.2848 session highs and now trades at 1.2832.

Elsewhere, traders report real money demand for USD/JPY, he;ping lift that pair to the 84.30 area.

EUR rallies as ECB raises forecasts

Seels like the ECB is treating the meltdown of European markets this spring as a tempest in a teapot and if looking ahead to a recoverying economy going forward. Staff raised its forecasts for growth and inflation but the Council announced that it will keep weak banks on life support for some months to come, at a minimum.

The market seems to like the combination and has pushed EUR/USD up toward offers in the 1.2840/50 area.

Trichet: ECB to extend full-allotment liquidity provision through beginning of January, at least

The spigots remain open at the ECB so that EU banks can maintain their funding base.

Watch the press conference here.

ECB staff has revised upwards its GDP forecast to +1.4/1.8% and to 0.5%/2.3% in 2011.

ECB staff forecasts for inflation were revised higher, the 1.5/1.7% for 2010 and 1.2/2.2% in 2011.