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By XE Market Analysis August 18, 2017 2:33 pm
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    XE Market Analysis: Asia - Aug 18, 2017

    The combination of terror attacks, and ongoing U.S. political gyrations riled markets again in N.Y. on Friday, taking USD-JPY to four month lows of 108.61 in the process, as risk-off conditions prevailed. Later in the session, it became clear that White House advisor Bannon was on his way out, which quickly brought a relief rally to Wall Street, and saw USD-JPY jump better than 70 points to session highs of 109.60. EUR-USD was largely sideways through the session, unmoved by the fireworks elsewhere, ranging between 1.1730 and 1.1761. USD-CAD fell back on in-line Canada CPI figures, and stayed under 1.2600 into the close. Cable printed new one-month lows of 1.2833.

    [EUR, USD]
    EUR-USD was largely unmoved by the improved shift in the risk backdrop, which came after it was reported that WH advisor Bannon was out of a job. The pairing has managed just a 1.1730 to 1.1761 range since the open. Aside from the current bout of political uncertainty, central bank uncertainty remains as well, with the ECB not showing any cards vis a vis its exit strategy, and the Fed divided on the rate hike path going forward. As a result, further EUR-USD consolidation appears to be in the cards.

    [USD, JPY]
    USD-JPY remained in the doldrums through the morning session, after printing four-month lows of 108.61 early. The pairing later edged slightly higher, though risk-off continued to be the driver, as U.S. political concerns, weighing on odds for the implementation of Trump's pro-growth agenda, and the Barcelona terror attack kept nerves jarred. Later, it was risk-on. USD-JPY popped about 70 points to N.Y. highs of 109.60 following reports that White House advisor Bannon is on the way out. The S&P 500 and NASDAQ turned positive, paring earlier moderate losses, providing a tonic to risk-sensitive USD-JPY.

    [GBP, USD]
    Cable plied a relatively narrow range below 1.2900 through the N.Y. morning session, forays above which over the last couple of days have proved short lived. The pairing later printed one-month lows of 1.2833 into the London close. The close below 1.3012 made this the third consecutive week of decline. Over the last month, the pound has fallen by an average 2.7% against the dollar, euro and yen, which has occurred with the UK economy in relative stagnation, associated with Brexit concerns. We continue to take a bearish view of sterling.

    [USD, CHF]
    EUR-CHF got a boost from the departure of WH advisor Bannon on Friday, rallying nealy100 points to 1.1360 highs. Risk-off shifted to modest risk on in the aftermath of the news, taking some pressure of the pairing in the process. The price action also suggests that the Swiss franc still has vestiges of being a safe haven, despite the SNB's best efforts to dismantle it. We still look for EUR-CHF to eventually "close the gap" by returning to the 1.2000 level, which had been the SNB's floor until abandoning it in January 2015.

    [USD, CAD]
    USD-CAD was lifted by the weak Canadian manufacturing data early in the session, taking the pairing from opening lows near 1.2615 to highs of 1.2665. Overnight, USD-CAD had rallied from a two-week base of 1.2589, supported by further oil price weakness. U.S. politics continued to roil markets, with the latest event being rumors that Trump's chief economic advisor Cohn may resign. Wall Street took a tumble on the rumors, supporting USD-CAD as risk-off conditions emerged again.

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