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By XE Market Analysis January 12, 2018 2:26 pm
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    XE Market Analysis: Asia - Jan 12, 2018

    The dollar perked up briefly following warmer U.S. core CPI and solid retail sales figures, though as has been the case for a month, sellers quickly took charge. EUR-USD had fallen to 1.2111 lows after the data, though later vaulted to three-plus year highs of 1.2157. USD-JPY bounced from opening lows of 111.15 to a high of 111.69, before falling to 111.10 lows into the close. USD-CAD topped at 1.2556 before bottoming at 1.2470 on an uptick in oil prices. Cable managed its highest since the Brexit vote, topping at 1.3714.

    [EUR, USD]
    EUR-USD has rallied to levels last seen in December of 2014, topping at 1.2155. The euro has rallied to fresh highs on news of a breakthrough in coalition talks in Germany, which followed yesterday's ECB minutes, which many in the FX market interpreted as being hawkish. General dollar malaise has been widespread however, resulting in cable at trend highs, and USD-JPY under pressure.

    [USD, JPY]
    USD-JPY printed new six-week lows of 110.97 into the N.Y. open, subsequently rallying to 111.69 highs on the back of strong U.S. data, and firmer Treasury yields. Sellers stepped back in ahead of 111.70, which represents the 200-day moving average, seeing the pairing return to111.20 lows. General USD weakness, along with the BoJ surprise QE tapering announcement continues to keep a lid on the pairing.

    [GBP, USD]
    Cable rallied to a post-Brexit vote high of 1.3714. The gain largely reflected broader dollar weakness. There remains a lack of strong domestic leads out of the UK. There hasn't been any Brexit-related developments of significance, with negotiations on a future trading relationship with the EU not due to begin until March. Next week brings some key data, including UK December CPI, and December retail sales.

    [USD, CHF]
    EUR-CHF rallied to three-year highs of 1.1802 on Friday, as EUR-USD continued to climb following the hawkish leaning SCB minutes on Thursday, and hopes for a new German coalition government. 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 climbed to 1.2556 highs after the U.S. data, before settling back to 1.2486 lows. After losing better than $1.50/bbl from Thursday's highs, WRI crude bounced to $64.16, weighing on USD-CAD. Traders will now look ahead to next week's BoC policy meeting, where a 25 basis point rate hike is expected.

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