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By XE Market Analysis December 12, 2018 2:57 pm
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    XE Market Analysis: Asia - Dec 12, 2018

    The Dollar eased some in N.Y. trade on Wednesday, taking the DXY to 96.90 lows from overnight highs of 97.49. A benign U.S. CPI print weighed some on the Greenback, as did the return of risk-on conditions following reports of progress in the U.S./China trade war. EUR-USD topped at 1.1387 before edging back under 1.1360, while USD-JPY dipped to 113.16 from highs near 113.50. USD-CAD bottomed at 1.3323 on firmer oil prices. Cable peaked at 1.2671, up from pre-open lows of 1.2520.

    [EUR, USD]
    EUR-USD rallied to 1.1387 highs in N.Y. trade, up from near 1.1325 at the open. Benign U.S. CPI data, and a firming of the Pound following reports that PM May will survive the no-confidence vote both helped to lift the Euro. EUR-USD is likely to consolidate inside of recent trading ranges ahead of Thursday's ECB policy meeting.

    [USD, JPY]
    USD-JPY has pulled back from the seven-session highs of 113.52 posted in London, falling to 113.16 ahead of the London close before finding support. The modest pullback came despite the risk-on backdrop, on talk of Japanese account Yen repatriation. Support comes at 113.01, which was Tuesday's low.

    [GBP, USD]
    The Pound has outperformed, topping at 1.2671. Indications, which became more apparent as the day proceeded, that UK Prime Minister May has sufficient support to win her no confidence vote lifted the Sterling, after dropping sharply yesterday. A profit taking, short-covering dynamic has been dominating, which along with some tactical demand from UK exporters, have driven sterling higher. There is some conjecture in markets that a victory by May today would shore-up her position and improve the odds for Parliament passing the government's Brexit deal, but we still think it will fail unless the EU makes a major concession on the Irish border backstop.

    [USD, CHF]
    EUR-CHF has settled after yesterday extending to a two-and-a-half month low at 1.1225. The losses reflect Brexit-related angst after UK Prime Minister May postponed the parliamentary vote on the EU Withdrawal Agreement, which generated confusion and increased the perceived risk of a hard, no-deal Brexit scenario. This weighed on both the Pound and the Euro while reviving the Franc's historic role as a safe haven (despite the punishing -0.75% overnight deposit rate). The SNB conducts its next quarterly policy review tomorrow. The central bank has been continuing to tread carefully amid heightened uncertainty about the economic outlook, geopolitical risks and protectionist threats. Recent market volatility and Brexit risks will do little to change the SNB's stance, and we expect the central message to remain that the situation remains fragile and the currency "highly valued" while maintaining policy unchanged.

    [USD, CAD]
    USD-CAD was under some pressure through the North American morning, bottoming at 1.3323, after opening over 1.3380. Risk-on conditions saw the USD fade broadly today, while firmer oil prices have supported the Loonie. Monday's 1.3290 low is the next support level.

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