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By XE Market Analysis January 11, 2018 1:55 pm
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    XE Market Analysis: Asia - Jan 11, 2018

    The dollar took an early hit on Thursday in N.Y. trade, as ECB minutes said the Bank could change its guidance in early 2018 if the EU economy continues to expand. Incoming U.S. data missed the mark, weighing further on the USD, as jobless claims were higher than expected, and PPI cooler than forecasts. EUR-USD rallied from pre-open lows of 1.1937 to 1.2058 highs. Cable was supported as well, as it followed the euro higher, topping at 1.3554 into the London close. USD-CAD fell to 1.2521, pressured by trend high oil prices, and some encouraging developments with regards to NAFTA negotiations.

    [EUR, USD]
    EUR-USD spiked up to 1.1990 from 1.1935 after ECB minutes said the Bank could change its guidance in early 2018 if the EU economy continues to expand. The pairing had been fairly steady through the London morning session. From there, further buying took the euro to one-week highs of 1.2058, as the dollar overall came under further pressure.

    [USD, JPY]
    USD-JPY remains heavy, bottoming at 111.23, and down from London highs of 111.87. The pairing continues to suffer following the BoJ's surprise QE tapering announcement, along with a generally soft dollar. USD-JPY traded just under Wednesday's six-week low, and it remains under its 200-day moving average at 111.70, which on a closing basis, provides solid resistance.

    [GBP, USD]
    Sterling traded mixed on Thursday, losing ground to the euro, which has been outperforming on the back of the ECB minutes, while gaining on the dollar. There remains a lack of strong domestic leads out of the UK. Next Tuesday's release of UK CPI data for December will give market participants the next top tier data. Cable recovered to a 1.3554 peak. A cluster of recent daily highs at 1.3577-86 mark a key resistance zone.

    [USD, CHF]
    EUR-CHF rallied to one-week highs of 1.1757 after the ECB minutes revealed talk of changes in policy guidance if EU growth continues. Over the last six months, the franc has seen its biggest weakening, both against the euro and in trade-weighted terms, since the Eurozone crisis took hold back in 2010. The Eurozone has seen political threats diminish, which has been accompanied by steady and assured pickup in growth momentum. This backdrop, along with the enticement of the SNB's -0.75% deposit rate, have seen the franc unwind any vestiges it had of being a safe haven currency. Assuming the Eurozone can continue to conquer political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable (the central bank reaffirmed this commitment at its recent quarterly policy review), we anticipate EUR-CHF will make an eventual return to 1.2000, which was the former floor the central bank maintained until January 2015.

    [USD, CAD]
    USD-CAD traded to 1.2590 highs overnight, as NAFTA jitters continued following the Reuters story on Wednesday saying Canadian government officials are increasingly convinced that the U.S. will exit the trade agreement. The pairing has since retreated back to 1.2525 lows on the back of a broadly weaker USD. The next round of trade negotiations takes place in Montreal starting January 23, though it remains to be seen if recent comments from both sides of the border are signs of negotiation failure, or gambits to strengthen negotiating positions. Canada's foreign minister Freeland was upbeat in talking with reporters today, saying the three nations are close to deals on some subjects, which she described as "bread and butter issues." She was hopeful on the upcoming Montreal talks, saying "I think if there's goodwill on all sides, we could have a great outcome in Montreal."

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