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By XE Market Analysis April 13, 2018 2:29 pm
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    XE Market Analysis: Asia - Apr 13, 2018

    The DXY advanced modestly ahead of the N.Y. open on Friday, though spent much of the remainder of the session sideways to slightly lower. The index topped at 89.88, before falling off to 88.72 in light afternoon trade. A softer U. of Michigan sentiment outcome weighed some on the dollar, though activity overall was thin. EUR-USD bottomed at 1.2307 before peaking at 1.2344, while USD-JPY gave back early gains to 107.78, dropping to 107.38, as risk taking levels slipped. USD-CAD reclaimed the 1.26 handle on reports that a NAFTA deal is not a certainty. Cable fell back from 12-week highs of 1.4297, later settling around 1.4250.

    [EUR, USD]
    EUR-USD was again stuck inside a narrow trading band to end the week, opening at lows of 1.2307, and peaking at 1.2334 after the London close. Much weaker than expected industrial production data earlier in the week provided fresh evidence of there being a notable economic slowdown in the Eurozone, which, along with ECB policy-meeting minutes showing that most members are not convinced that inflation is on a sustained path higher, have weighed on EUR-USD since mid-week. Calming trade rhetoric, should it continue, will add some upside room for the dollar.

    [USD, JPY]
    USD-JPY has been on the rise in early N.Y. trade, topping at a near two-month high of 107.78. Gains have come on the back of calmed trade rhetoric, which allowed equities to rise early in the session. In addition, the pairing appeared to gravitate toward the 108.00 level, where substantial option expiries were noted for the 10:00 EDT options cut, though after expiration, USD-JPY slid to session lows of 107.44 before steadying.

    [GBP, USD]
    Cable settled lower after hitting a 12-week high at 1.4297 in Morning London trade, making this the fifth up week out of the last six. Various reasons are been cited in market narratives. One is the expectation for the BoE to hike rates at its monetary policy meeting next month, which would follow last November's first-in-a-decade hike, and take the repo rate to 0.75%. Another is seasonal, with the end of the UK's fiscal year often leading to a pickup in sterling demand. And another thread of market conjecture centres on the benefit of last month's EU and UK's agreement on a 21-month post-Brexit transitory period, which has calmed nerves in the business and investor community by buying more time to figure out the Northern Irish border situation and negotiate new trading terms.

    [USD, CHF]
    EUR-CHF has broken sharply higher last week, extending to a fresh 39-month high at 1.1890 on Thursday. The SNB is widely expected to remain strongly committed to negative interest rates until after the ECB starts tightening. SNB board member Maechler, for instance, recently bemoaned a still "highly valued" currency and argued that premature tightening in monetary policy would be counterproductive. EUR-CHF has rallied nearly 11% from mid last year. We have a long standing target for the cross to return to the 1.2000 level, which was the SNB's cap that was abandoned back in January 2015.

    [USD, CAD]
    USD-CAD has been on the rise since the North American open, with pre-weekend short covering stepping in after fail to take out Wednesday's trend low of 1.2543, and on not so good news on the NAFTA front. The pairing has topped at 1.2616, after touching a low of 1.2552 into the open. The Globe and Mail reported that the three NAFTA nations are still far from reaching a deal to renew the trade agreement.

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