Home > XE Currency Blog > XE Market Analysis: Asia - Jan 30, 2019

AD

XE Currency Blog

Topics6300 Posts6345
By XE Market Analysis January 30, 2019 3:35 pm
    XE Market Analysis's picture
    XE Market Analysis Posts: 4309
    XE Market Analysis: Asia - Jan 30, 2019

    The dollar slid lower after the FOMC announcement, where no changes to rates were made, as-expected. The statement removed reference to further gradual rate increases, and said the Fed was prepared to adjust balance sheet normalization, both of which weighed on the Greenback. EUR-USD popped over 1.1495, a nearly three-week high from 1.1515, while USD-JPY fell under 108.85 from 109.55.

    [EUR, USD]
    EUR-USD remained heavy ahead of the Fed, touching lows of 1.1407. Sellers emerged following the cooler than forecast German January CPI outcome, though ahead of the Fed, traders did not push too hard. European short covering was noted into the European close, and just as well, as the pairing rallied to highs over 1.1480 after the dovish Fed statement.

    [USD, JPY]
    USD-JPY rallied to highs of the week before the FOMC, peaking at 109.75, and up from Asian session lows of 109.21. Surging equities provided the buying impetus, with the Dow opening up 1% following earnings beats from Apple and Boeing. USD-JPY resistance now comes at 109.96, then the psych 110.00 level, where Japanese exporter offers are rumored to be parked. They were not to be filled however, as USD-JPY slid to lows under 109.05 after the dovish tilting FOMC statement.

    [GBP, USD]
    Cable eased into the 1.3055 level ahead of the FOMC, though bounced to highs over 1.3140 after the dovish Fed. Yesterday, the UK Parliament rejected two amendments that would have delayed Brexit in the event a withdrawal deal was not struck by mid February, but Parliament also voted for an amendment that declares its opposition to a no-deal Brexit, which although nonbinding, was the catalyst for the leader of the Labour opposition, Jeremy Corbyn, to now talk with the prime minister, having earlier refused to do so, suggesting there is hope for a cross-party consensus being formed on an alternative withdrawal plan. Parliament additionally voted for Prime Minister May to return to Brussels to try and win a concession on the Irish backstop -- but this has been promptly rejected by the European council president, Tusk, and other key EU leaders. We continue think a no-deal Brexit will be avoided. While May, who voted for the UK to remain in the EU at the referendum in 2016, and her allies have been utilizing the threat of a chaotic no-deal exit for negotiating leverage, we think she, her government and Parliament, will ultimately ensure a no-deal scenario doesn't become a reality.

    [USD, CHF]
    EUR-CHF clocked a new 10-week high at 1.1437, with late gains coming as EUR-USD raved higher following the dovish FOMC statement. This extends a phase of relatively high volatility that the franc has seen, which has seeing several periods of pronounced underperformance, which have often been accompanied by talk/suspicions of SNB intervention. SNB Chairman Jordan said last week that "current monetary policy is the right one and we will continue to with it for some time." He said that for 2019 the biggest concerns are "political mistakes," pointing to the U.S.-China trade war and "Brexit and the European situation."

    [USD, CAD]
    USD-CAD continued to trade lower, falling to nearly three-week lows of 1.3186 pre-FOMC. The pairing closed near 1.3270 on Tuesday. Oil prices were the main driver early on, though risk-on conditions weighed on the pairing as well. WTI crude ran up over 2.5% to better than two-month highs of $54.78, following a bullish EIA inventory report, supporting the CAD. The FOMC statement later pushed the pairing to better than two-month lows under 1.3120. Canada GDP for November is due Thursday, and is on track to contract 0.1% as the sharp decline in oil prices materially impacted the economy back then.

    Paste link in email or IM