Home > XE Currency Blog > XE Market Analysis: Asia - Aug 01, 2019


XE Currency Blog

Topics7137 Posts7182
By XE Market Analysis August 1, 2019 3:05 pm
    XE Market Analysis's picture
    XE Market Analysis Posts: 5061
    XE Market Analysis: Asia - Aug 01, 2019

    The Dollar came under some pressure in the morning session in N.Y. on Thursday, weighed down by weaker manufacturing and construction spending data. The Greenback later fell to session lows against all major currencies following Trump's imposition of 10% tariffs on an additional $300 bln of U.S. imports from China. The driver of the move was Treasury yields, which crashed lower. The 2-year note was down 17 basis points, with the 10-year down 13 bps, to levels last seen in 2016. USD-JPY was on two-week lows of 107.25, down from two-month highs of 109.31 seen overnight. EUR-USD meanwhile, rallied to 1.1095 from better than 2-year lows of 1.1027 early in the N.Y. session. USD-CAD fell from 1.3232 highs to 1.3183 lows, while Cable recovered to 1.2170 from trend lows of 1.2079. Gold prices moved higher, while WTI crude has plunged over 8% on the session.

    [EUR, USD]
    EUR-USD bottomed at two-plus year lows of 1.1027 early in the session, though later caught a bid following manufacturing ISM and construction spending data misses. The pairing had made it to 1.1070 highs when Trump tweeted on fresh 10% tariffs on Chinese goods. This saw yields plunge, and the Dollar move broadly lower, taking EUR-USD to highs just under 1.1100. The new tariffs will dent global growth sentiment negatively, and indeed, Fed Fund futures moved to an 80% chance at a September 25 bp rate cut, up from near 60% ahead of Trump's tariff Tweet.

    [USD, JPY]
    USD-JPY has fallen sharply from the two-month highs of 109.31 printed during Asian hours, basing at one-week lows of 108.15 at mid-morning. The pairing had been on the decline ahead of the weaker manufacturing ISM and soft construction data, though losses picked up after the releases, helped lower by a dive in Treasury yields. The risk-sensitive pairing later collapsed to two-week lows of 107.25 following Trump's new China tariffs, which saw yields dive, and Wall Street turn big gains into big losses. Next support comes at 107.21, the July 19 low, with resistance up at 108.27, marking the 50-day moving average.

    [GBP, USD]
    Cable printed a 31-month low at 1.2079 in early N.Y. trade. The fresh trend lows seen against the Dollar came in the wake of the the BoE's unchanged policy announcement, which was accompanied by trimmed-down GDP projections in the Bank's latest quarterly Inflation Report. While the BoE disappointed markets to a degree by refraining to shift out of its "gradual and limited" tightening guidance on the continued assumption that the Brexit process is smooth, Governor Carney promised an update of its "worst case" Brexit scenario in September during his press conference, and prognosticated that a no-deal, no-transition Brexit -- the odds for which have markedly risen with the ascendance of Boris Johnson as UK prime minister -- would likely see sterling fall while the risk premiums on UK assets rose, arguing that no-deal contingency preparations "cannot eliminate the fundamental economic adjustments to a new trading arrangement that a no-deal Brexit would entail." Cable is set to post its 10th down week out of the last 13 weeks versus the dollar. The Pound later bounced over 1.2165 as Trump announced new tariffs on imports from China.

    [USD, CHF]
    UR-CHF has settled after rebounding with gusto last week after the ECB refrained from hitting the rate-cut button on Thursday. The cross, which is sensitive to ECB policy, sprang to a recovery high of 1.1063 from a 24-month low at 1.0962. We still anticipate EUR-CHF to remain biased lower as the ECB shifted to an explicit easing bias, laying the groundwork for a comprehensive set of easing measures in September. The risk of a disorderly no-deal Brexit on October 31 is also in the mix, which is a bearish factor for the cross.

    [USD, CAD]
    USD-CAD printed six-week highs of 1.3247, up sharply from the one-week low of 1.3105 seen on Wednesday following the large draw in U.S. crude inventories. Oil prices were down sharply in morning dealings, trading under $56.60, after topping over $58.80 yesterday. In addition, general USD strength seen following the less dovish than expected FOMC announcement has provided support. Later, the pairing followed the Dollar broadly lower, after Trump announced new China tariffs, bottoming at 1.3183, though quickly bounced over 1.3230 as WTI lost an additional $3/bbl. The contract was down more than 8% at its worst levels.

    Paste link in email or IM