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By XE Market Analysis December 18, 2018 2:05 pm
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    XE Market Analysis: Asia - Dec 18, 2018

    The Dollar recovered some in N.Y. trade on Tuesday, taking the DXY to 97.16 from seven-session lows of 96.72 seen into the open. USD short covering ahead of the FOMC announcement on Wednesday was a driver, though the market appears to be ready for a dovish statement from the Fed after it likely raises rates by 25 basis points. This could lead to Dollar weakness after the announcement. EUR-USD eased to 1.1350 from 1.1402 highs, while USD-JPY recovered to 112.63 from 112.25 lows. USD-CAD printed new 18-month highs as oil prices crashed lower again. Cable slipped under 1.2625 from highs over 1.2700.

    [EUR, USD]
    EUR-USD was capped at 1.1402 into the N.Y. open, since pulling back to 1.1350 lows. The pairing remains in sell-the-rally mode, and has struggled to hold the 1.14 handle since the beginning of November. Fed rate hikes, a still-dovish ECB and EU economic slowing should continue to keep a lid on the Euro.

    [USD, JPY]
    USD-JPY bounced to 112.63 highs, after printing near two-week lows of 112.25 into the N.Y. open. Today's Wall Street rally triggered some short covering, though the pairing remains sensitive to the risk backdrop. Given recent equity market volatility, USD-JPY will not likely hesitate to move lower again should stocks give back their gains.

    [GBP, USD]
    Cable drifted lower after printing seven-session highs of 1.2706 in London morning trade, bottoming under 1.2625. All Brexit bets look to be off until the new year. The London interbank market has entered into the Christmas doldrums, and the UK Parliament is winding down for the Christmas recess. The parliamentary vote on the Brexit deal and outline for a future relationship will take place in the week of January 14, before the legislated deadline of January 21. Our best guess remains that Parliament will vote down the deal and, of all the possible scenarios at that point, that a new EU referendum will be the path of least resistance.

    [USD, CHF]
    EUR-CHF rallied briefly over 1.1400 into the N.Y. open, as Switzerland cut its growth forecast, highlights downside risks. The Swiss government followed the SNB and downgraded its outlook for Swiss GDP growth next year to just 1.5%, from 2.0% expected in September.

    [USD, CAD]
    USD-CAD rallied to fresh 18-month highs of 1.3494 as WTI crude prices continued to plummet (down 5-plus percent on the session). Now, with the break above 1.3472, which was the June 9, 2017 peak, the door is open for a test of the psych 1.3500 level.

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