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By XE Market Analysis August 13, 2019 2:22 pm
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    XE Market Analysis: Asia - Aug 13, 2019

    The Dollar firmed up early in the session, supported by a warmer than expected U.S. CPI report. Wall Street and Treasury yields started lower however, with the 30-year bond printing all-time low yields of 2.095%. The Dollar, equities, and yields were subsequently jolted higher by news that the U.S. would re-start trade negotiations with China, and would push back implementation of new tariffs from September 1 to December 15. Risk-sensitive USD-JPY shot up to 106.97 from near 105.10 at the open, while EUR-USD fell from pre-CPI highs of 1.1228 to 1.1170. USD-CAD firmed to 1.3293 early, later falling to 1.3185 as oil prices rallied $3 on trade deal hopes. Cable was relatively steady, easing from near 1.2100 to 1.2050. Looking ahead, the FX market will remain cautious over the trade negotiation news, as the two sides appear to remain far apart on terms. This will likely keep the Dollar inside of a choppy trading band for the time being.

    [EUR, USD]
    EUR-USD fell to session lows of 1.1170 after the trade news, where U.S./China negotiations are set to resume in two-weeks, and the imposition of additional tariffs were pushed back to December 15 from September 1. The pairing has since recovered to 1.1195 highs. Firmed up Treasury yields and sharp Wall Street gains helped the pairing lower initially, though given the on-again, off-again trade talks, traders may take today's news with a grain of salt. An errant Trump tweet could quickly undo the apparent progress made today without warning. Bigger picture, EUR-USD is liable to remain anchored to the 1.1200 level, as Italy's political crisis, and Brexit, along with Europe's fading growth outlook will limit the Euro's rise, especially given the ECB is set to ease policy in September as well.

    [USD, JPY]
    USD-JPY perked up to early N.Y. session highs of 105.51, up from 105.15 ahead of the U.S. CPI data. Slightly warmer prices and Wall Street were the drivers of the move, which saw stocks turn opening losses into decent gains. In addition, Treasury yields have edged higher, also supportive of the pairing. Later, the pairing spiked up to six-session highs of 106.97, with the surprising trade headlines contributing to a significant short squeeze. The pair was up more than 180 points from pre-CPI lows. Meanwhile, WTI crude spiked up to near two-week highs over $57.00, while gold futures fell back from six-year highs near $1,546 to under $1,491 Wall street remained sharply higher, while yields have turned higher.

    [GBP, USD]
    Cable eased back under 1.2050 in N.Y. trade, down from early highs of 1.2097. UK unemployment unexpectedly ticked higher to a 3.9% rate in June, slightly up on the 44-year low 3.8% that had been prevailing in recent months, but the employment rate remained at a joint record high and wage growth hit an 11-year high rate. The data didn't cast much impact on markets, and seems backward looking given the intense focus on upcoming Brexit dramas. Regarding Brexit, there are intense debates and of backroom machinations in the corridors of Westminster at play, but little in the way of substantial developments. This will change when the UK parliament returns from its summer recess on September 2, with "no to a no-deal Brexit" members plotting to legislatively block no-deal as an option.

    [USD, CHF]
    EUR-CHF rallied to 1.0920 from 108.45 following the the announcement that U.S./China trade talks would re-start, and that new tariffs would be delayed. Subsequent risk-on conditions supported the cross. Further upside may be a chore however, as the ECB is on course for additional monetary stimulus in September, and the likelihood for further risk aversion in global markets.

    [USD, CAD]
    USD-CAD has rallied to 1.3293 highs in early trade, with the move higher gaining traction following the warmer U.S. CPI outcome. Buyers had stepped in ahead of the North American open, taking the lead from WTI crude prices, which fell over $1 from overnight highs. Later, prospects for the reboot of U.S./China trade talks supported oil prices, and therefore, the CAD. USD-CAD fell to 1.3185, as WTI crude shot up over $57.40 from $54.40 on hopes for a trade deal. Major resistance for USD-CAD is at 1.3301, which represents the 200-day moving average.

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