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By XE Market Analysis October 30, 2019 3:53 pm
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    XE Market Analysis: Asia - Oct 30, 2019

    FX trade was quiet ahead of the FOMC announcement, though the USD did perk up slightly early in the session following an in-line ADP jobs report, and a better than expected Q3 U.S. GDP outcome. Later, the Dollar traded slightly higher after the Fed cut interest rates by 25 basis points, as was widely expected. The statement said the committee would "assess" conditions on rate levels going forward, versus the previous statement language, which said the FOMC would "act as appropriate". A slightly more hawkish stance, which saw EUR-USD dip to 1.1103 from near 1.1120, and USD-JPY rally to 108.99 from near 108.85. Overall though, reaction to the Fed was relatively muted, leaving recent FX majors inside of familiar trading ranges. USD-CAD was an exception, which rallied to two-week highs after a surprisingly dovish BoC policy statement. Into the close, the Greenback unwound earlier gains, as stocks and yields moved higher as Powell said the Fed notes there are significant disinflationary pressures around the world and that the U.S. is not exempt from those pressures, indicating another cut is possible should conditions warrant. Looking ahead, U.S. personal income, consumption and jobless claims will feature on Thursday, with the October employment report, and manufacturing ISM due Friday.

    [EUR, USD]
    EUR-USD hit 1.1102 lows after the better than expected Q3 U.S. GDP report, then spent the remainder of the morning slowing climbing to over 1.1125 ahead of the FOMC announcement. While a 25 basis point cut was largely priced in, the statement was a tad less dovish, and language on rate moves going forward was shifted to "assess" from "act as appropriate", somewhat indicating the rate cut was an "insurance" cut , and not another in a string of cuts going forward. The pairing fell to 1.1080 during Fed chief Powell's press conference, though later popped to highs near 1.1150 as yields fell, as Powell did not take another cut totally off the table.

    [USD, JPY]
    USD-JPY was steady since the N.Y.. close on Tuesday, bottoming at 108.81 in Asia, before peaking at 108.88 in London morning trade. The lack of movement was directly related to traders sitting on the sidelines ahead of the FOMC announcement, and the BoJ's policy announcement overnight tonight. Later, as the Fed cut rates as expected, though shifted language to a slightly more hawkish tone, the pairing rallied to near three-month highs over 109.25. Gains were short-lived, and the pairing fell back to 108.75 into the close. The wildcard now comes from the BoJ, where the market is mixed on the BoJ's course of action. A downturn in Japan CPI may prompt the Bank to ease further, especially since the Fed cut rates as expected.

    [GBP, USD]
    Sterling consolidated a moderate gains seen in London following political developments in the UK, later easing toward 1.2845 from near 1.2900 following the less-dovish FOMC statement. The Brexit deal is, for now, off the agenda with the political parties now gearing up for a December-12 general election. Cable gains reflect a partial unwinding in the Brexit discount markets have been demanding of the pound. The Brexit saga is not over, and all options remain open -- from a no-deal Brexit to Brexit-cancelled, depending on the election results. PM Johnson's Conservative Party has a 13 point lead on the Labour Party, though this election is highly unusual,and many political pundits in the UK have been emphasizing there is a high level of unpredictability, despite what polls might suggest.

    [USD, CHF]
    EUR-CHF has been lifted recently by the diminishing in no-deal Brexit risks, which has been supportive of the euro. The cross last week printed a two-and-a-half-month high at 1.1059 and has since remained buoyant.

    [USD, CAD]
    USD-CAD rallied from 1.3085 after the BoC announcement, where rates were left unchanged, as expected. The Bank's dovish tilting statement said in part "Growth in Canada is expected to slow in the second half of this year to a rate below its potential. This reflects the uncertainty associated with trade conflicts, continuing adjustment in the energy sector, and the unwinding of temporary factors that boosted growth in the second quarter", which e weighed on the CAD significantly. Ahead of the FOMC, the pairing rallied to 1.3185, with another push to 1.3208 highs following the hawkish tilted FOMC statement.

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