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By XE Market Analysis April 27, 2021 2:13 pm
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    XE Market Analysis: Asia - Apr 27, 2021

    The Dollar was relatively steady through the N.Y. session on Tuesday, largely maintaining recent trading ranges. Traders appeared to be partially sidelined ahead of Wednesday's FOMC announcement, though reaction to what will in all probability be a non-event, should be muted. Today's April consumer confidence data beat the Street by a long shot, though ultimately did the Dollar no good. Wall Street was modestly lower through the day, as investors pulled back ahead of key big tech earnings reports and the FOMC. Yields were a little firmer. Wednesday's calendar has the advance March goods trade report, which should see the deficit widen slightly to $87.2 bln from $87.1 bln. Advance March wholesale and retail inventories are also on tap, along with weekly MBA mortgage and oil inventory figures.

    [EUR, USD]
    EUR-USD has been range bound below recent highs through the N.Y. session, touching 1.2093 highs at the open, and 1.2069 lows after the London close. The Dollar has largely been in wait and see mode ahead of the FOMC announcement on Wednesday, though no one really looks for any surprises or significant changes in the outlook versus March (this meeting does not include new economic projections). The USD now appears to have taken on a consolidative bent following Monday' DXY drop to near two-month lows. As the U.S. economy heats up, yields are likely to rise, which should keep the Dollar afloat through H2 of this year.

    [USD, JPY]
    USD-JPY printed six-session highs of 108.53, poised to close above its 50-day moving average (108.37) for the first time since January. The BoJ trimmed inflation forecasts following its policy meeting last night, which put some weight on the Yen. In Japan, the country is facing its third state of emergency to contain Covid cases, just months away from hosting the Olympics. The April 20 top of 108.55 is initial resistance, with a move above there set to target the April high of 108.80, then the 109.00 level.

    [GBP, USD]
    Cable headed up from London lows of 1.3859, touching 1.3918 in early N.Y, before pausing before at making a 1.3924 ahead of the London close. Sterling has over the last month underperformed, though We retain a bullish view on the Pound against the Euro. UK local elections in early May will warrant monitoring, particularly with regard to how the pro-independence parties fare, and whether they can reach a supermajority in the Scottish parliament. This would legitimize calls for another independence referendum, though polls have been tipping out of their favour lately. It's a close call: Politico's poll-of-polls tracker currently shows 46% favour remaining in the UK with 45% favouring an exit, with the remaining 9% undecided.

    [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 had held above the key 110.00 level for over a month, before dipping under the level from April 9 to 13, printing a better than one-month low of 1.0975 before reclaiming the 1.10 handle again, and touching a three-week high of 1.1071 on Monday.

    [USD, CAD]
    USD-CAD remained above Monday's six-week low of 1.2384, though only managed a high of 1.2419 into the North American open. The USD has remained generally soft, while oil prices continue to hold up reasonably well, despite Covid fires in India, Japan and Brazil. The BoC's surprise decision to taper its QE program last week appears to have lowered USD-CAD's trading band a notch, with the two-plus year low of 1.2365 seen on March 18 again in focus. The growth of Covid cases in Canada appears to have peaked, while the vaccine rollout has stepped up some recently, indicating the worst may be over for Canada now. This should help the CAD, at least at the margins.

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