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By XE Market Analysis January 16, 2018 3:03 pm
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    XE Market Analysis: Asia - Jan 16, 2018

    The dollar was relatively steady in N.Y. trade on Tuesday, seeing the DXY crawl up to 90.82 highs, before pulling back to 90.57 lows. A softer headline Empire State index outcome had little impact. EUR-USD bottomed at 1.2196 early in the session, before topping at 1.2248. USD-JPY meanwhile, held above 110.60, peaking at 110.88 early in the session. USD-CAD dipped briefly under 1.2400 before steadying near 1.2425. Cable maintained altitude over 1.3750.

    [EUR, USD]
    EUR-USD bottomed at 1.2196 early in the N.Y. session, before making its way to 1.2248 highs into the London close. The euro dropped sharply overnight on political concerns in Germany, with some SPD factions reportedly uncertain, or in outright rejection, of proposals to form a grand coalition. This rattled EUR-USD and euro crosses, which had been aggressively bid up in recent sessions. Potential for further fallout in Germany may keep euro bulls sidelined for the time being.

    [USD, JPY]
    USD-JPY recovered modestly to 110.88 highs after printing four-month lows of 110.34 on Monday. The solid risk backdrop, including the Nikkei's move to 26-year lows overnight, has weighed some on the yen. This said, the BoJ's surprise QE tapering announcement continues to put a cap on the pairing. Japanese exporter offers are reportedly parked from the 111.00 level now.

    [GBP, USD]
    Cable traded with a modest softening bias so far today. The dip in UK CPI to 3.0% in December from November's 3.1% cycle high had a modest impact on the pound, although matching expectations. PM May said that the UK would definitely be leaving the EU on 29th March 2019 following remarks from Donald Tusk, the president of the European Council, who said that the EU is open to Britain having a "change of heart." Cable settled around 1.3760 after earlier logging an intraday low at 1.3741.

    [USD, CHF]
    EUR-CHF clocked a new 37-month high at 1.1833 on Monday, tracking gains in EUR-USD. The cross has been on a broadly upward path since mid last year, reflecting economic recovery in the Eurozone, alongside the apparent passing of the worst of the existential political threats to the Euro area. The SNB's punitive -0.75% deposit rate has also been in the mix of directional drivers. EUR-CHF would need to reach 1.2000 to fully reverse the losses that were seen after the SNB abandoned the franc cap in January 2015, which is something we anticipate will be achieved in the coming months.

    [USD, CAD]
    USD-CAD pulled back from pre-open highs of 1.2452, basing at 1.2397. The pairing has consolidated at the bottom of its recent range, and can be expected to remain sideways into tomorrow's BoC policy announcement, where we see a 25 basis point rate hike. NAFTA uncertainty has been a driver of CAD direction over the past week, though should not be enough of a factor to keep the BoC on the sidelines.

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