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By XE Market Analysis October 11, 2019 2:55 pm
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    XE Market Analysis: Asia - Oct 11, 2019

    With the exception of USD-JPY, the Dollar was lower in N.Y. trade on Friday. Save-haven flows seen into the USD over the past week or so have been unwound to a degree on positive trade news, while strength in the pound and Euro have stepped up on hopes for a Brexit resolution. GBP-USD rallied to three-month highs of 1.2707, up nearly 500 points from Thursday's low. EUR-USD meanwhile, printed three-week highs of 1.1063. USD-CAD fell to one-month lows of 1.3171 following a strong Canada jobs report. USD-JPY bucked the Dollar trend, rallying to two-month highs on the back of risk-on conditions, related to hopes for at least a partial trade deal between the U.S. and China.

    [EUR, USD]
    EUR-USD printed its third straight day of gains, peaking at 1.1063, a better than three-week high. The reversal of safe-haven flows into the Dollar has continued into the weekend, with reports now that a partial U.S./China trade deal may be in the cards. In addition, the Brexit ordeal may finally be about over, with hopes for an agreement next week. The pairing traded over its 50-day moving average (1.1048) for the first time since early August, and a close above the level will be taken as a technical bullish result.

    [USD, JPY]
    USD-JPY rallied to two-month highs of 108.62, up from 107.88 lows seen into the N.Y. open. The move came as Trump indicated progress on the trade front, tweeting "good things are happening at China Trade Talk Meetings. Warmer feelings than in recent past, more like the old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen." The risk-sensitive USD-JPY has recovered more that 200 points from Monday's low, though sustained recovery will depend on the outcome of this week's trade talks.

    [GBP, USD]
    The Sterling surge intensified on Friday, with the Pound closing out with the biggest two-day rally in 25 years as markets rapidly re-priced the odds for a Brexit deal being reached. The striking shift in tone of Irish PM Varadkar following his meeting with PM Johnson on Thursday was the initial catalyst. According to a Guardian source who has been briefed on the new proposals, the "pathway" to a deal is rooted on an idea for Northern Ireland to leave the customs union and to continue to "follow" the EU rules. This won't be pleasing for the Unionist parties in Northern Ireland, but it could still be a politically viable solution as polls have suggested there may be majority support in Northern Ireland to remain under the umbrella of the EU customs union. If the EU agrees to these proposals, then Brussels would almost certainly pressure opposition in the UK to vote for it at the October-19 "super Saturday" sitting of Parliament by means of refusing any extension in Brexit beyond the October 31 deadline. Cable topped at three-month highs of 1.2707, just a few points under its 200-day moving average.

    [USD, CHF]
    EUR-CHF rallied to two-month highs of 1.1039 on Friday from Tuesday's post-close low of 1.0870. An improvement in risk appetite again helped lift the cross, as the U.S. and China appear to be on the verge of progress on trade. In the U.K., Brexit concerns eased, with Irish PM telling PM Johnson "sees pathway to a possible deal" on the Irish backstop issue.

    [USD, CAD]
    USD-CAD slid to one-month lows of 1.3171 from just under 1.3300 in the aftermath of a much stronger Canada jobs report. The pairing had been as high as 1.3345 in overnight dealings. The CAD has benefited from higher oil prices as well, as WTI crude rallied to two-week highs over $54.80. The positive risk backdrop on hopes for some sort of U.S./China trade deal has also helped the Loonie. The pairing traded under its 20-, 50-, and 200-day moving averages in the span of about a minute following the employment data.

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