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By XE Market Analysis January 4, 2019 2:29 pm
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    XE Market Analysis: Asia - Jan 04, 2019

    The dollar rallied in early N.Y. trade on Friday, following a stellar U.S. December employment report. Later, the Greenback slid lower as Fed chief Powell underscored that the Fed would be patient and flexible with respect to the policy path, and would adjust policy as conditions warranted. That helped unwind market misconceptions that the course of policy normalization was on auto pilot. He added the Fed would be patient in its approach. EUR-USD rallied to 1.1418 from 1.1346 lows, as USD-JPY peaked at 108.59, from opening lows of 108.00. USD-CAD topped at 1.3473 on a softer Canada jobs report, though later fell to 1.3379 on general USD weakness. Cable topped at 1.2745.

    [EUR, USD]
    EUR-USD rallied to 1.1418 highs, up from 1.1355 following comments from Fed Chief Powell, who said the policy path is flexible, and the FOMC is listening to the market's risk concerns. The talk has seen Wall Street rally to session highs, with the Dow up over 800 points at one stage. .

    [USD, JPY]
    USD-JPY fell from session high of 108.59, which was seen after the jobs report. From there, the Powell comments weighed on the Dollar overall, taking USD-JPY to 108.07 lows. The subsequent Wall Street rally, and return of risk-on conditions has seen the pairing move up over 108.30 again. The Yen remains negatively correlated to risk levels, and will likely continue to do so for the time being.

    [GBP, USD]
    Cable rose over 0.6% in making a two-day high at 1.2745. The Dollar overall came under pressure following Fed's Powell comments, where "flexibility" was emphasized with regards to the policy path. As for Brexit, the EU emphatically rejected the latest, and most likely last, efforts by UK Prime Minister May to win concessions on the Irish board backstop, and it continues to look highly probable that her deal will be voted down at the upcoming parliamentary vote.

    [USD, CHF]
    EUR-CHF recouped to around the 1.1250 level after Wednesday punching out a four-month low at 1.1184, which was seen as the Swiss franc picked up safe haven demand in the wake of Apple's revenue warning (which in turn followed December manufacturing PMI data showing weakening across key global economies). The SNB remained firmly on hold at its quarterly policy meeting last month, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency in times of heightened uncertainty about the global outlook.

    [USD, CAD]
    USD-CAD popped to 1.3473 from 1.3435 following the mix of data, which saw Canada's job creation miss the mark slightly, and saw IPPI and RMPI come in cooler than expected. The pairing edged back to the 1.3450 level soon after, likely as WTI crude has reclaimed the $48 handle, though later dropped to 1.3379 lows, in the aftermath of Powell comments, which saw the Dollar slide broadly lower.

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