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By XE Market Analysis April 26, 2018 3:13 pm
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    XE Market Analysis: Asia - Apr 26, 2018

    The DXY shot up to three-plus month highs of 91.61 highs in N.Y. on Thursday, as euro weakness was the major driver following an ECB press conference which was decidedly more cautious on the growth outlook than the policy statement suggested. EUR-USD fell from 1.2180 t o1.2198 lows. Incoming U.S. data was supportive of the dollar overall, as claims, durables and the advance trade deficit all beat estimates. USD-JPY was unable to take out Wednesdy's trend hig, though remained on the 109 handle. USD-CAD turned sideway following sharp gains seen over the past week. Cable, meanwhile, fell to 1.3907 lows.

    [EUR, USD]
    EUR-USD fell to 1.2154 lows, just above its March 1 bottom of 1.2153. The move from near 1.2180 came following the ECB announcement, where there were no changes to policy, as expected, and no hints on when the end of QE may be coming. A EUR-USD move under 1.2153 will take the pairing to levels last seen on January 12. The pairing later crashed to three-plus month lows of 1.2098, as the FX market apparently decided the ECB is more concerned about the EU growth outlook than the statement initially implied. Draghi suggested the Bank needed more data in order to decide direction for the economy and inflation, implying no policy changes anytime soon. EUR-USD sell-stops were reportedly in place at 1.2140

    [USD, JPY]
    USD-JPY stopped just under Wednesday's 109.47 two-plus month high, coming from 109.07 lows earlier in the session. The risk-on backdrop, along with higher Treasury yields, and decent incoming U.S. data continued to support this morning. The rise of the 10-year T-note yield to 3% this week and the BoJ's continued pegging of the 10-year JGB yield to near 0.0% has been a bigger picture of USD-JPY strength this week.

    [GBP, USD]
    Cable posted moderate gains in morning N.Y. trade, topping at 1.3988 before falling back to 1.3907 in sympathy with EUR-USD's slide. The pair dropped sharply last week, and now needs to close the day above 1.3926 to help affirm that a basing pattern is forming, though we still anticipate the pair will trade steady-to-lower into the May 10th BoE monetary policy decision.

    [USD, CHF]
    EUR-CHF continued to consolidate recent gains. This is the fourth consecutive week, and the sixth out of the last eight weeks EUR-CHF has rallied, and the cross is now over 12.5% higher from the levels of mid last year. The franc has been driven lower by the -0.75% Swiss deposit rate along with the widespread expectation for the SNB to remain strongly committed to negative interest rates until after the ECB starts tightening. The central bank's chairman, Jordan, said in an interview with the La Liberte newspaper this week that "it is not yet time to change monetary policy," adding that "we do not want to provoke an appreciation of the Swiss franc."

    [USD, CAD]
    USD-CAD appears to be in consolidation mode for now, steadying in a relatively narrow range, hanging in the mid-1.28s, after climbing to near 1.2900 from 1.2550 at mid-week last week. Given the BoC's cautious, data driven outlook on policy shifts, the FX market may have to wait for further Canadian data points to determine CAD direction. In the meantime, U.S. data and oil prices will give some guidance.

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