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By XE Market Analysis December 17, 2019 3:07 pm
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    XE Market Analysis: Asia - Dec 17, 2019

    The Dollar had been on the decline through the London morning session, though perked up after the N.Y. open on the back of better than expected U.S. data. Both housing starts and industrial production beat forecasts, allowing the Greenback to head higher. The DXY recovered from 947.03 lows, later topping at 97.24. Trade overall was again quiet, as participants wind down into year-end. EUR-USD ranged between 1.1145 and 1.1158, as USD-JPY idled in the mid 109s. USD-CAD meandered between 1.3175 and 1.3144. Cable softened to 1.3101 lows into the London close.

    [EUR, USD]
    EUR-USD traded a narrow range in N.Y., bottoming at 1.1145 early, then making its way to 1.1158 highs later in the morning session. FX activity has broadly declined since the start of the week, with holiday mode now in full swing. Both the Fed and ECB appear to be on hold for the foreseeable future, so directional drivers will shift in 2020. The U.S. continues to grow moderately, while in Europe, the slowdown seen through the fall appears to have stabilized. As a result, EUR-USD range trade may be in vogue as the new year kicks off.

    [USD, JPY]
    USD-JPY put in a very narrow trading bank in N.Y, keeping the pairing confined to a 109.45 to 109.63 band since the N.Y. open. A relatively neutral risk backdrop, despite improved U.S. data, has seen volatility dry up this morning. Holiday mode has kicked in from the start of the week, and more sideways price action can be expected into year-end. The U.S. economy is in good shape going into 2020, which should keep USD-JPY underpinned going forward.

    [GBP, USD]
    Cable fell to 1.3101 lows from London highs near 1.3300. The catalyst was news that UK prime minister Johnson will amend the withdrawal agreement bill to outlaw an extension in the transition period beyond the end of 2020. This is something of a surprise, though clearly this is a good negotiating tactic. To be sure, trade negotiations between the UK and EU should go much quicker than any of the EU's other trade negotiations with third countries, though many trade experts have said that one-year for even a bare-bones trade agreement would be a tall order.

    [USD, CHF]
    EUR-CHF has settled lower after spiking on Friday to a six-week peak of 1.1033 on news of the strong election victory of the Conservative Party at the UK's election. This heralds the end of a protracted period of Brexit related uncertainty, which had been casting a pall over both the UK and European economies. The euro also posted gains against the dollar and yen, and most other currencies, with the main exception being the case against the pound.

    [USD, CAD]
    USD-CAD rallied to session highs of 1.3176 from opening lows of 1.3155 following the weak Canada manufacturing data. Gains were fleeting however, as WTI crude rallied to three-month highs near $61.00/bbl. The pairing later bottomed at 1.3144. Looking ahead, progress on the USMCA trade agreement, and a phase one trade deal between the U.S. and China, should reduce business uncertainty in 2020, likely seeing the CAD hold its own versus the USD.

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