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By XE Market Analysis August 16, 2019 2:57 pm
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    XE Market Analysis: Asia - Aug 16, 2019

    The dollar headed mostly lower in N.Y. on Friday, dented by a softer consumer sentiment report, and news that Germany will shift to deficit spending should the country enter recession. The latter gave the euro a boost from two-week low of 1.10667, to 1.1106 highs. USD-JPY remained supported by general risk-on conditions, topping at 106.43, after falling to 106.21. USD-CAD idled near its 200-day moving average for mush of the day, later dipping to 1.3275 on pre-weekend position squaring. Cable managed a one week high of 1.2175, following decent U.K. data this week. Wall Street headed higher as yields recovered some, with upbeat news on U.S/China trade war helping stocks as well. Next week's data calendar is relatively light, and the Jackson Hole Symposium will attract market focus the second half of the week.

    [EUR, USD]
    EUR-USD reversed from over two-week lows to highs of 1.1106 at mid-morning. The move higher came as reports circulated that Germany may shift to deficit fiscal spending should Germany head into recession. These reports saw Bund yields head higher, along with the Euro. Recent dovish ECBspeak from Rehn, who said on Thursday the Bank needs an "impactful and significant" stimulus package, perhaps even expanding the QE program to buying equities. The FX market is geared up for further easing in September, though more talk like this will keep ongoing pressure on EUR-USD.

    [USD, JPY]
    USD-JPY bottomed at 106.21 immediately following the weak consumer sentiment outcome, though has since rallied to N.Y. session highs of 106.43. The risk-on backdrop, including higher stocks and Treasury yields, has put a floor under the pairing, though given the likelihood for further trade angst, along with NoKo missile firings, and unrest in Hong Kong, will likely limit USD-JPY upside potential going forward.

    [GBP, USD]
    Cable outperformed for a second straight day, posting a rare up week after months of sustained underperformance. The pairing topped at 1.2175, levels last seen a week ago Thursday. Above-forecast retail sales, inflation and average pay data out of the UK this week have had the effect of turning down the anxiety dial with regard to the state of the UK economy. There is not much likelihood for a sustained rebound in the Pound at this juncture, though the currency appears to have finally based-out. Markets are bracing for the upcoming anti-no-deal versus pro-no-deal Brexit showdown in the UK's parliament, which will commence on September 3.

    [USD, CHF]
    EUR-CHF stemmed its recent bleeding in N.Y. on Friday, as the CHF was sold off modestly on the back of the return to risk-on conditions. Thursday marked the lowest seen since mid-June of 2017. From here, upside price action may be limited, as the ECB is on course for additional monetary stimulus in September, perhaps more aggressively than initially thought, and the likelihood for further risk aversion in global markets remains high.

    [USD, CAD]
    USD-CAD peaked at 1.3309 in early North American trade, after touching 1.3287 lows into the open. The 200-day moving average at 1.3304 continued to act as a magnet through the morning session, with the pairing not straying too far from the level over the past two-sessions. Softer oil prices have put a floor under USD-CAD, while risk-on conditions in morning trade limited gains. Into the close, the pair dipped to 1.3275 on pre-weekend position squaring activity.

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