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Forex Market Update: Euro-Dollar (EURUSD) Recovered From Intraday Low to 1.2780

Euro-Dollar (EURUSD) recovered from early dip to trade back in to the 1.2780 region. Demand for EUR-GBP has been a supportive factor for EUR-USD, with the cross eyeing another test of levels above 0.8200 after it found support ahead of 0.8150 from European names following a rally out of 0.8110-15 in late Asia. Also influencing the euro is talk of Eastern European interest following overnight speculation of a Russian RUB devaluation, although its unclear whether it would keep a base in EUR-USD. In general, euro has outperformed early on despite weak European equity markets and negative sentiment generally, which has previously been a bearish influence given the flight to quality trading. However, there is speculation of central bank support in the pair, which will add to speculation of more Eastern European flows. Elsewhere, Volkswagen tapped the ECB for liquidity, with EUR 2.8 bln in securities used in exchange for funds next month according to a spokesman on Monday, which is the first automaker to do so in Europe.

Meanwhile, British Pound challenged intra-day lows in early European trade, with Cable pressured by European interbank names and general interest from leverage accounts and speculative funds, which favored low yield currencies like the Dollar, Yen and Franc. Cable traded at 1.5560, but found support ahead of good size bids at 1.5550, while EUR-GBP backed away from 0.8180 offers after it recorded 0.8177 highs. Cable reclaimed the 1.5600 handle in thin trading conditions, which may leave emphasis on the cross after it hit new record highs of 0.8208 on Monday. Good size stops are noted above 0.8210 and are reportedly spread across a number of European houses. Elsewhere, more weak U.K. data was noted overnight, with the BRC retail sales data showing a 1.8% y/y fall in like-for-like sales, while total sales fell 0.1% y/y. The October RICS house price balance unexpectedly improved to -81.1 from -84.5.