• Fearful of low liquidity ahead of Memorial Day weekend, fund managers cover significant portion of month-end requirements
  • Kuwait Investment Authority denies trimming European investments
  • ECB’s Gonzalez-Paramo: Recent sharp moves in currencies not welcome
  • US GDP revised to 3.0% from 3.2% in Q1.
  • US weekly jobless claims fall 14,000 to 460,000
  • Bank of Portugal: Austerity will slow growth
  • ECB’s Noyer: Euro at more “normal” level
  • Berlusconi: We have defeated speculative attack on euro
  • IMF: Greece not looking to renegotiate any aspects of agreement, including pensions
  • US sells $31 bln 7-year notes at 2.815%, bid to cover 2.88
  • Moody’s: Greater confidence Portugal to make deficit target after austerity plan
  • S&P 500 rises 3.3%, US 10-yr note rises 15-bp in yield to 3.35% as risk aversion eases
  • Oil rises $3.20 to $74.70, Gold steady at $1212

It was a very choppy today on Thursday as the market reacted to headlines overnight that China denied it was shifting gears regarding investments in Europe. Prices retrenched in early New York trading in EUR/USD, slumping from overnight highs at 1.2343 to the 1.2202 at the New York options cut only to rebound shortly there after.

By the London close, EUR/USD was making new session highs and the rally extended as far as 1.2395. Some of the gains were blamed on thin markets ahead of the upcoming long weekends in NY and London while jawboning from ECB executive committee member Gonzalez-Paramo helped underpin the euro as well. Hedge fund short-covering of short-positions in risk assets was a key feature as well.

One of those risk assets was EUR/JPY, which rocketed today. It rallied as far as 112.76 while USD/JPY zoomed to 91.00. It stalled just shy of its 200-day average at 91.03.

AUD flew higher as well today, putting a medium-term bottom in place technically, prompting heavy short-covering. The rally reached 85.17 and we close near our highs. AUD/JPY was rock-fuel as well, jumping to 77.50.

Cable edged above 1.4600, fueled by a snap-back in risk appetites.

1.2415 is next resistance for EUR/USD overnight while Asian central bank offers are rumored above 1.2450, traders relayed late in the day. Look for very thin month-end markets Friday.