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By XE Market Analysis June 19, 2018 2:48 pm
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    XE Market Analysis: Asia - Jun 19, 2018

    The dollar succumbed to a minor round of profit taking after the N.Y. open, taking the DXY from 11-month highs of 95.30, to 95.00 lows. Focus was on trade wars, and following the newest threat to slap more tariffs still on China, Wall Street and yields headed lower. On the data front, new home sales were better than forecast, but had little impact on market. EUR-USD climbed from lows of 1.1533, later topping at 1.1585. USD-JPY managed a modest recovery to 110.10 from 109.71. USD-CAD made near one-year highs as oil prices fell back, and as NAFTA concerns remain front and center. Cable recovered from seven-month lows of 1.3152, topping at 1.3186.

    [EUR, USD]
    EUR-USD was pushed lower in London morning trade by remarks by ECB President Draghi and his colleague Liikanen, the former saying "we will be patient will the timing of the first and will take a gradual approach... thereafter" and the latter saying interest rates could be kept on hold until after the summer of 2019 if needed. The Ifo institute also trimmed its German growth forecast. EUR-USD bottomed at 1.1531, and opened the N.Y. session at lows of 1.1533. From there, a narrow range ensued, though some short covering into the London close lifted the pairing to highs of 1.1583. EUR-USD remains in a sell the rally mode, on the back of slowing growth in Europe, and a decidedly dovish ECB.

    [USD, JPY]
    USD-JPY climbed up from its 7-session low of 109.56 printed in early London, since trading back to touch 110.10 highs. The safe-haven yen rallied on news of Trump's threat of more tariffs on Chinese goods, which saw global equity markets fall sharply. With Wall Street well under water as well, USD-JPY upside was limited through the remainder of the session.

    [GBP, USD]
    Cable lifted off lows, though remained sharply lower on the day. Market participants continue to anticipate this week's BoE MPC meeting to hold policy unchanged while acknowledging a run of weaker data, the net result of which will likely be to push expectations for a 25 bp rate hike to the November MPC meeting, away from the August meeting. Brexit-related uncertainty remains in the mix, with a divided government still hammering out what type of Brexit -- soft or hard -- it wants. Regarding Cable, we continue to advise trend following

    [USD, CHF]
    EUR-CHF dropped to a 10-day low of 1.1525 on Friday and has remained heavy since. The losses followed the ECB's dovish guidance signal of last Thursday, which saw the cross tumble from levels above 1.1600. EUR-CHF is now about midway levels of the range that's been seen over the last three weeks. The ECB's policy stance should ensure that the SNB remains resolutely committed to its ultra-accommodative monetary policy setting in an attempt to ward off, or at least limit, franc gains against the euro.

    [USD, CAD]
    USD-CAD rallied to 1.3291 highs, its loftiest since late June of 2017. The pairing has now posted four-consecutive sessions of higher daily highs. The sell-off in commodities today has provided upside fuel, though the bigger driver remains the trade backdrop. Market talk of late has focused on NAFTA, with the FX market pricing in increasing odds that negotiations will fail to bear fruit, which could have huge implications for Canada's economy.

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