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By XE Market Analysis April 7, 2021 2:48 pm
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    XE Market Analysis: Asia - Apr 07, 2021

    The Dollar was choppy, but largely range bound in N.Y. on Wednesday. The DXY recovered from a two-week low of 92.14 to 92.36 in early afternoon trade. The wider than expected February trade deficit was overlooked by markets, and activity was restrained ahead of the FOMC minutes, where there were no surprises. The minutes again indicated that the Fed thought it would be "some time" before officials see the necessary condition of "substantial further progress" on the dual goals on employment and inflation. The minutes had little market impact. Wall Street was mildly underwater through much of the session, though perked up modestly after the minutes, while Treasury yields remained slightly heavy. Thursday's U.S. calendar brings weekly jobless claims. We expect initial claims to fall 39k to 680k, and continuing claims to drop 194k to 3.600 mln.

    [EUR, USD]
    EUR-USD peaked at better than two-week highs of 1.1915 in late morning, up from overnight lows of 1.1864. The pairing has since dipped to 1.1888 into the London close. Gains in the Dollar's yield advantage has stalled of late, as the market reevaluates prospects for Fed tightening, which has dented the Greenback's sentiment broadly this week. Given the economic growth outlook, which favors the U.S. over Europe, at least for now, should keep Euro gains contained in the larger picture.

    [USD, JPY]
    USD-JPY has remained under pressure, as has the USD for the most part. The pairing touched an eight-session low of 109.58, after printing overnight highs of 109.94. Capped Treasury yields appear to have taken the wind out of the Dollar's sails, as rates remain under their recent highs. This said, the USD's rate spread advantage remains supportive of USD-JPY in the bigger picture, and we look for further gains in the coming sessions.

    [GBP, USD]
    Cable fell to six-session lows of 1.3729 from overnight highs of 1.3840. The pairing had fallen from two-week highs of 1.3919 seen on Tuesday. A slightly softer U.K. services PMI negatively impacted Sterling, while short covering in EUR-GBP weighed on the GBP-USD as well. That cross had hit better than one year lows on Monday. Next Cable support comes at the March 31 base of 1.3717.

    [USD, CHF]
    The SNB maintained its expansionary policy stance. The statement stressed that the pandemic "is continuing to have a strong adverse effect on the economy", adding that despite the "recent weakening, the Swiss franc remains highly valued" and against that background the policy rate was held at -0.75% and the bank stressed that "it remains willing to intervene in the foreign exchange market as necessary". The bank will also continue to supply the banking system with liquidity on "generous" terms. Nothing really new there, despite the fact that the SNB lifted its conditional inflation forecast on the back of higher oil prices and a weaker CHF. EUR-CHF has held above the key 110.00 level for over a month now.

    [USD, CAD]
    USD-CAD rallied to six-session highs of 1.2635 in early North American trade, up from overnight lows of 1.2566. The Canada trade report had little impact on the CAD, nor did the much stronger Ivey PMI print, though a downdraft in oil prices dented the CAD's fortunes through the morning. The 50-day moving average at 1.2631 provided a good resistance level, as sellers returned just above it. Later, a partial recovery in in WTI crude prices saw USD-CAD ease back toward 1.2600.

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