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By XE Market Analysis January 23, 2020 3:05 pm
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    XE Market Analysis: Asia - Jan 23, 2020

    The Dollar index touched one-month highs of 97.80 in N.Y. trade on Thursday, though major USD pairings were mixed overall. EUR-USD pulled back to 1.1036 in morning trade, weighed by an ECB meeting which indicated no end in sight to the ultra-easy policy stance. USD-JPY fell to two-week lows of 109.26 as risk-off conditions prevailed, while USD-CAD slipped to 1.3130 on profit taking following Wednesday's rally following the dovish BoC policy stance. GBP-USD was range bound over 1.3100. Incoming U.S. data included inline jobless claims and a small leading indicators miss, neither of which had any market impact. Wall Street. Wall Street was lower, though pared losses after the WHO declined to declare the coronavirus a global health emergency.

    [EUR, USD]
    EUR-USD peaked at 1.1109 following the opening comments from ECB chief Lagarde, where she sounded relatively optimistic on the economic and trade fronts. Since then, the pairing has fallen back to levels last seen on December 2, bottoming at 1.1036. Lagarde did say risks remain tilted to the downside, and that ultra easy monetary policy would continue for the foreseeable future. Given the tepid outlook for the European economy, set against a solid U.S. economic outlook, EUR-USD will remain in sell-the-rally mode for now.

    [USD, JPY]
    USD-JPY fell from highs of 109.65 into the open, later falling to 109.26 into the London close, a two-week low. Risk-off conditions weighed on the pairing, with falling stocks and nervousness over the coronavirus outbreak supporting the Yen, along with lower Treasury yields. The pairing bounced slightly after the WHO declined to declare the coronavirus a global health emergency. The next support level comes at 109.17, which is the 50-day moving average.

    [GBP, USD]
    Cable remained in the upper half of Wednesday's two-week high, printing 1.3152 in early Asian hours. The pairing steadied between 1.3135 and 1.3200 thought the N.Y. session. Recently improved U.K. data have seen expectations for the BoE to cut rates as soon as next week's policy meeting fall measurably. We have been arguing that the BoE is likely to refrain from cutting rates at this juncture, and instead opt to ratchet up dovish guidance.

    [USD, CHF]
    EUR-CHF carved out a fresh 33-month low at 1.0701. Both the cross and USD-CHF have more than given back their respective rebound gains of yesterday. A richening in safe-haven premiums in global markets is underpinning the Swiss currency, long with the yen. This comes with Asian stock markets coming back under heavy pressure, and about contagion of the coronavirus, with concerns remaining, despite Beijing's best efforts, that the upcoming Lunar New Year holiday period will accelerate its spread.

    [USD, CAD]
    USD-CAD eased back from the one-month high of 1.3172 printed overnight, bottoming at 1.3130 in light afternoon dealings. The pairing remains well above the 1.3050 level that was trading just ahead of the BoC's announcement on Wednesday, as the Bank's statement said "Data for Canada indicate that growth in the near term will be weaker, and the output gap wider, than the Bank projected in October", along with "Job creation has slowed and indicators of consumer confidence and spending have been unexpectedly soft." The dovish statement, along with sharply lower oil prices should limit USD-CAD downside potential going forward.

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