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By XE Market Analysis June 12, 2019 2:31 pm
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    XE Market Analysis: Asia - Jun 12, 2019

    The Dollar came under pressure early in N.Y. trade on Wednesday, following a cooler core U.S. CPI outcome. The CPI print kept potential Fed rate cuts front and center, weighing on the Greenback generally. Later, a round of USD short covering stepped in, taking the DXY to highs of the week at 96.97, up from early lows of 96.59. EUR-USD topped at 1.1340, later falling to 1.1290, while USD-JPY ranged between 108.26 and 108.54. USD-CAD rallied over 1.3320 from 1.3274 lows as oil prices stayed down, while Cable peaked at 1.2759, later dropping under 1.2685. Big picture, we expect the Dollar to remain in range trade mode until the FOMC announcement next Wednesday.

    [EUR, USD]
    EUR-USD moved back session mid-range, trading on either side of 1.1320 through much of the morning. The pairing topped at 1.1340 after the U.S. CPI data, subsequently bottoming at 1.1308, then steadying into the London close. The cooler U.S. inflation print should limit EUR-USD downside for the time being, as the market continues to price in Fed rate cuts in the coming months. The ECB on the other hand, remains in perma-dove mode, with talk on the rise of more QE coming, as EU inflation remains stubbornly soft. As a result, Euro gains are liable to be limited, and as such, we find ourselves in range trade mode. The Euro later matched Monday's 1.1290 low, as intra day profit taking set in.

    [USD, JPY]
    USD-JPY headed to N.Y. session highs of 108.54, after slipping to near 108.25 after the cooler U.S. CPI data. Treasury yields bounced off their lows, while Wall Street attempted to rally, both positives for USD-JPY. The core CPI miss upped the ante for Fed rate cuts, perhaps in July, which put a floor under stocks briefly in morning trade. Yields later came under pressure following a solid 10-year sale, while stocks turned deeper into the red, resulting in USD-JPY slipping back toward 108.40.

    [GBP, USD]
    The pound picked up a little demand after Boris Johnson, the odds-on favorite to become the new UK prime minister said at his official launch of his campaign that he is not aiming for a no-deal Brexit. That was the cue for markets to carry Cable to a new three-session high, at 1.2758, drawing further in the three-week seen last Friday at 1.2763. Sterling also lifted versus the euro, among other currencies. Boris is known as a flip-flopper on policies, so can expect more of this should be become the new leader of the Conservative Party. Betfair odds for Boris becoming PM have an implied probability of 56.5% -- far ahead of his nine rival contenders. Cable later fell under 1.2685, as USD short covering stepped in into the close.

    [USD, CHF]
    EUR-CHF rallied over two-week highs at 1.1264 in N.Y. on Wednesday, reflective of broader Euro gains and a degree of unwinding in safe-haven positioning amid a burgeoning in central bank easing expectations. The gain put some further space in from the 23-month low that was printed at 1.1119 last week. The SNB's Alternate Governing Board Member Moser said recently that in his view "if we had higher interest rates then we would have a stronger exchange rate", which something the central bank is ever eager to prevent. The SNB continues to bank on the combination of a negative deposit rate and the threat of ad hoc currency intervention to keep the CHF under control, while trying to limit the impact of the negative rates on the domestic economy with the help of macroprudential instruments. Moser said that the risks in the Swiss real estate sector remain bearable, although he admitted that in the current environment these could increase.

    [USD, CAD]
    USD-CAD topped at 1.3305 into the North American open, coming from overnight lows of 1.3278. Sharply lower oil prices supported the pairing, though the broadly weaker USD backdrop limited gains. Fed rate cut expectations have seen the Greenback under pressure since the start of June. Cooler U.S. CPI took the pairing to 1.3274 lows later, though another sell-off in oil prices saw USD-CAD top over 1.3320 later in the session.

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