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By XE Market Analysis January 15, 2020 2:52 pm
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    XE Market Analysis: Asia - Jan 15, 2020

    The DXY fell to six-session lows of 97.16, down from overnight lows of 97.44. Cooler U.S. PPI numbers weighed on the USD, though narrow trading ranges were again the rule through the session. The signing of the phase one U.S./China trade deal supported risk-on conditions, which pushed Wall Street to fresh record highs. Treasury yields slipped a bit on the softer inflation reading. EUR-USD peaked at 1.1164, up from opening lows of 1.1140, while USD-JPY meandered between 109.79 and 110.00. USD-CAD eased from 1.3078 to 1.3033. GBP-USD steadied near 1.3030, up from London lows of 1.2988.

    [EUR, USD]
    EUR-USD topped at six-session highs of 1.1164 following the cooler U.S. PPI print, since turning sideways near 1.1160 in light trade. The Dollar continues to enjoy an interest rate advantage over the Euro, which will keep EUR-USD gains capped going forward, though with the ECB not solidly on hold, and the EU economy showing signs of stabilizing, the recent trading band of 1.1000 to 1.1200 should hold up for the time being.

    [USD, JPY]
    USD-JPY has pulled back modestly from the near eight-month highs of 110.21 seen on Tuesday, touching 109.79 lows in early N.Y. trade, and since rallying back to 110.00 as Wall Street posts fresh record highs. Th signing of the phase one trade deal has put a positive spin on risk taking levels, supportive of USD-JPY, though advances over the key 110 level have been thwarted, as Japanese exporter selling and spec profit taking have put a cap on the pairing for now.

    [GBP, USD]
    Cable moved back to the lower 1.3000s after printing a low at 1.2984. The three-week low seen yesterday at 1.2961 was left unchallenged. UK CPI fall to 1.3% y/y in December, contrary to the median forecast for an unchanged 1.5% y/y outcome, though the print was broadly in line with BoE projections. The upcoming BoE Monetary Policy Meeting, on January 30, is now a live meeting. The OIS market is discounting nearly an 60% chance for a 25 bp rate cut at the end of the month, up from about 50-50 odds before the inflation data. A rate cut is now fully factored-in by the end of May. The BoE-sensitive 2-year Gilt yield had dropped by some 19 bp over the last week.

    [USD, CHF]
    EUR-CHF hit fresh 32-month lows of 1.0741 in N.Y. trade on Wednesday. The cross managed a 1.0834 high on Monday, as geopolitical fears faded some, though comments from a Swiss finance official on Tuesday, who said "It's to be stressed that Switzerland doesn't manipulate its currency in any way to achieve an adjustment in its balance of payments or an unjustified competitive advantage", gave the market license to buy the Franc.

    [USD, CAD]
    USD-CAD has faded to lows just under 1.3035, coming from early highs of 1.3078. Cooler U.S. PPI weighed to a degree, while the partial recovery in WTI crude prices, helped by the signing of the U.S./China phase one trade deal, has supported the CAD. We expect a period of consolidation inside of the past week's trading range to persist for now, ahead of key Canada manufacturing and CPI data next week, along with the BoC policy meeting.

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