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By XE Market Analysis March 22, 2018 2:59 pm
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    XE Market Analysis: Asia - Mar 22, 2018

    The DXY bounced to 89.96 highs, after printing 89.41 one-month lows in London morning trade. Risk off conditions prevailed through the session, as trade concerns rose following Trump's direction to the U.S. Trade Office to consider increased tariffs on Chinese goods, with a list that initially would include $50 bln in Chinese exports. The dollar was supported by safe-haven flows. Wall Street was not impressed however, as stocks fell sharply, and yields followed. EUR-USD topped at 1.2332, before bottoming at 1.2286. USD-JPY fell to 105.27 early, though managed to recover to 105.81 highs. USD-CAD recovered to 1.2937 highs, while cable slipped to 1.4076 lows, after making seven-week highs of 1.4216 after the BoE announcement.

    [EUR, USD]
    EUR-USD has stuck to a narrow trading range through the session, though remains soft in the aftermath of weaker European PMIs. The pairing topped at 1.2388 before the data, since touching 1.2286 lows into the London close. Dollar bottom-fishing has been noted, coming following the DXY's move to one-month lows on Wednesday.

    [USD, JPY]
    USD-JPY fell to within 2-points of the 16-month low of 105.25 seen on March 2. Risk-off trade was in full effect through the session, as stocks melted down on the back of funding pressures and China tariff talk. The pairing later advanced to 105.80 highs, though a break under 105.25 brings the sub 105.00 level into view, where sell-stops are said to be chunky.

    [GBP, USD]
    Sterling dropped back to net lower levels versus those seen after the BoE announcement. Cable clocked a low of 1.4076 in N.Y. trade, down from post-BoE high at 1.4222. The pound initially rallied on the BoE announcement on news that two of the seven MPC members voted for a 25 bp rate hike. The median forecast had been for a unanimous 9-0 vote for unchanged rate. The minutes showed the dissenters noting low spare capacity and accelerating wage growth. We see Cable as being in process of establishing a range in the low 1.4000s, after rising from early-March levels near 1.3700.

    [USD, CHF]
    EUR-CHF slipped to near 1.1650 following softer EMU PMI data, which saw EUR-USD slip as well. The cross has generally settled in a narrow-ranged consolidation near the 1.1700 level following the early-March break higher from sub-1.1500 levels. A seven-week high was logged last Thursday at 1.1741. The SNB yesterday announced unchanged policy, as had been widely anticipated, while reaffirming its commitment to monetary stimulus to keep what it still considers a richly-valued currency on a back foot. EUR-CHF rallied some 10% from mid last year, has been emblematic of the euro's recovery over the last year, with the franc unwinding latent safe haven premium as existential uncertainties under the Eurozone and EU come off the boil. Even though Eurosceptic parties won about 50% of the vote in Italy's recent general election, there forming political alliance, led by La Lega, has said Italy will remain in the EU and retain the euro.

    [USD, CAD]
    USD-CAD bounced from the eight-session low of 1.2830 seen in London morning trade, topping at 1.2935. Yields spreads widened in favor of the USD, while oil prices pulled back from their highs, both supportive of USD-CAD. Positive noises on NAFTA negotiations have been supportive of the CAD this week. Focus will shift to Friday's Canada CPI report.

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