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By XE Market Analysis June 12, 2018 3:10 pm
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    XE Market Analysis: Asia - Jun 12, 2018

    Markets were relatively quiet in the aftermath of the Trump/Kim summit, and ahead of Wednesday's likely Fed rate hike. The FX market saw the dollar perk up after the London close, taking the DXY to 93.85 highs from lows of 93.49. EUR-USD slipped to 1.1737 from 1.1801 highs, while USD-JPY topped at 110.44, up from 110.16. USD-CAD remained firm, peaking at 1.3020. Cable meanwhile, rallied to 1.3424 highs into the London close on short covering, before falling back into 1.3380.

    [EUR, USD]
    EUR-USD was sideways through the N.Y. morning session, as were most dollar pairings, ranging between 1.1801 and 1.1777 since the open. The pairing later dipped to 1.1737 lows, on reported positioning action ahead of the Fed. Price action should consolidate ahead of Wednesday's FOMC announcement, where a 25 basis point hike is expected, and Thursday's ECB meeting, where the Bank may communicate an ending date for QE asset purchases. In the meantime, recent trading ranges are likely to hold up. Support comes at 1.1726, Friday's low, and 1.1822, Monday's peak.

    [USD, JPY]
    USD-JPY has remained firm in the aftermath of the Trump/Kim summit, where the first steps have been touted a positive by most. In addition, the near certainty of a Fed rate hike on Wednesday, should keep the interest rate-sensitive yen under pressure. The pairing topped at 110.43 in early N.Y. trade, since finding support into 110.20.

    [GBP, USD]
    Cable recovered to levels around the 1.3425 mark, although seeing some choppy price action. UK labour data revealed a softening in wage growth, which dipped to 2.5% y/y growth in the three months to April, down from 2.6% y/y in the month prior and below the median forecast for an unchanged 2.6% y/y outcome. The unemployment rate remained unchanged, at 4.2%, which is a multi-decade low, in March, which met the median forecast. The weaker income figure will trim the probability for the BoE to hike rates as soon as August, as this has been a key metric for policymakers (given their concerns about diminishing spare capacity in the context of low productivity growth).

    [USD, CHF]
    EUR-CHF has softened back some after printing a three-week high at 1.1657 on Monday. The gains tagged EUR-USD gains as markets discount the ECB announcing the end of QE at its policy meeting this Thursday. The recent phase of euro weakness saw the cross lose over 4% from the 41-month high that was printed a month ago at 1.2005, which was the summit of an 11-month rally phase, and which in turn was a reflection of what had been -- before recently -- a sense of abating existential risks that the Eurozone was facing. The jury will remain out about how market friendly Italy's new government turns out to be.

    [USD, CAD]
    USD-CAD has remained inside of Monday's trading range, hovering between 1.3020 and 1.2980 since the North American open. Oil price gains have limited USD-CAD altitude, while trade uncertainties have put a floor under the pairing. Tomorrow's near-certain Fed rate hike has largely been priced in, though the widening of the USD interest rate spread could give the pairing a short-term boost.

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