Thin conditions form backdrop to FX flight to quality

European morning flows were exacerbated by thin, illiquid trading conditions. Early action favoured a flight to quality bid, which buoyed the dollar and weighed heavily on EUR, GBP and the commodity bloc currencies. However, Asian sovereign accounts were bargain hunting via EUR-USD ahead of 1.4800 and in Cable under 1.6300, which put a floor place, as did tentative support across European indices, which steadied after their early losses. Japanese intervention risk saw a decent short covering rally via USD-JPY, which extended to 86.82 versus 14-year lows of 84.83 seen in Asia. This took out a number of short term players via the dollar pairing and the JPY crosses and forced many to the sidelines ahead of an abbreviated U.S. session.