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By XE Market Analysis September 13, 2018 3:27 pm
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    XE Market Analysis: Asia - Sep 13, 2018

    Cool U.S. CPI data was the story for the Dollar in N.Y. on Thursday, which resulted in the Greenback initially losing ground across the board. As risk appetite picked up on hopes for progress on global trade, Wall Street rallied, allowing risk-sensitive USD-JPY to advance to just shy of 112.00. Safe-haven Dollar flows reversed however, sending EUR-USD briefly over 1.1700. USD-CAD rallied on softer oil prices, peaking at 1.3026. Cable meanwhile, followed EUR-USD's lead, topping at 1.3121. The BoE and ECB both left policy unchanged at their respective meetings, as was expected, and neither announcement had much FX market impact.

    [EUR, USD]
    EUR-USD shot up to two-week highs of 1.1701 following the downside miss in U.S. CPI, along with risk-on conditions as U.S./China trade talks are set to restart, and as NAFTA negotiations with Canada remain upbeat. These factors have taken the safe-haven bid from the Dollar. There were no surprises from the September ECB meeting. Draghi confirmed that net asset purchases will be cut back to EUR 15 bln in October and are still expected to be phased out by the end of the year. Rates meanwhile are still expected to remain on hold at least through the summer of 2019.

    [USD, JPY]
    USD-JPY has rallied to 111.95, levels last seen on August 1. The pairing dipped slightly yo 111.38 lows after the soft U.S. CPI data, though with hopes for progress on global trade, risk-on conditions have ensued, allowing the risk-sensitive Yen to fall. Japanese exporter offers, are again touted from the 112.00 level.

    [GBP, USD]
    Cable tracked EUR-USD higher following the benign U.S. CPI outcome, with the pair posting a six-week high of 1.3121 before steadying. EUR-GBP, meanwhile, showed a fractional gain, with the cross given buoyancy by ECB President Draghi, who said that uncertainty surrounding inflation is receding. The BoE's expected decision to leave policy unchanged had little impact on the pound, while the unexpected upgrade to Q3 growth was offset by caveats about risks to above-trend global growth and Brexit-related uncertainty.

    [USD, CHF]
    EUR-CHF was steady on either side of 1.1300, after falling under 1.1200 on Friday, following the release of the stronger than expected Q2 GDP outcome out of Switzerland. This pushed EUR-CHF to a 14-month low at 1.1181 on Friday, while Switzerland posted Q2 growth of 0.7% q/q while Q1 growth was upwardly revised to 1.0% y/y from 0.6% y/y. It's rare for Swiss data to impact the currency, but the strength of the data, which marks the fifth consecutive quarter of above-average expansion, and the strength of the manufacturing sector in particular, have invited analyst narratives questioning the need for the SNB's ultra accommodative policy. The Swiss deposit rate is -0.75%.

    [USD, CAD]
    USD-CAD has rallied back to 1.3026 highs after printing 1.2876 lows in the aftermath of the cooler U.S. CPI outcome. Further slippage in oil prices have supported, as WTI crude falls 2.5% to $68.40 lows. Resistance comes at 1.3053, which marks the 20-day moving average.

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