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By XE Market Analysis September 14, 2017 1:34 pm
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    XE Market Analysis: Asia - Sep 14, 2017

    The dollar rallied early in the N.Y. session on Thursday, driven by hotter U.S. CPI numbers, and better than expected jobless claims data. Initial gains were largely negated however, as reports that N. Korea was preparing a new ICBM test hit the wires. EUR-USD fell from 1.19 to 1.1839 lows, before spiking to session highs ot 1.1909. The pairing later steadied near 1.1880. USD-JPY topped 111.04 from 110.40, then retraced to 110.32 before stabilizing around 110.70. Cabke rallied sharply to one-year highs over 1.3400 following the BoE statement, which implied a rate hike is coming soon. USD-CAD steadied near 1.2200, with higher oil prices limiting upside potential.

    [EUR, USD]
    EUR-USD fell from just over 1.1900 to a 1.1839 tow-week low after the hotter U.S. CPI and better jobless claims data. Losses were short lived however, as initial dollar gains were subsequently unwound on a Nikkei report, citing a Japanese government source, that North Korea is prepping for a new missile launch. The euro snapped back to 1.1909 session highs, before settling on either side of 1.1880. EUR-USD risk remains to the downside, as the market holds out hope for U.S. tax reform, seen as a positive for the dollar overall.

    [USD, JPY]
    USD-JPY retreated from the one-month high of 111.04 printed following the warmer U.S. CPI and better jobless claims data. Subsequent reports that N. Korea was preparing another ICBM test, took the pairing back to 110.32, though has since been able to hold the 110.50 region. A more positive U.S. tax reform outlook should provide some support to the dollar overall, though with the yen, N. Korea remains a wild card.

    [GBP, USD]
    Sterling surged over 1% in the in the wake of the BoE's showstopper of a statement, where it gave its strongest guidance in a decade that a rate hike is in the pipeline. Cable clocked a high of 1.3404, which is a new one-year high. For reference, the pair would need to reclaim the 1.4800 level to reverse the losses seen in the wake of the Brexit vote on June 23 last year. Markets are digesting the statement, and already analyst narratives are centring on the November BoE MPC meeting as a likely venue for the Old Lady to reverse the post Brexit vote "emergency" cut of August 2016, which would involve hiking the repo rate by 25 bp to 0.50%.

    [USD, CHF]
    The Swiss franc took a knock on the SNB 's guidance, with the central bank, while admitting that exchange rate overvaluation is now less acute, stating that it would remain willing to "intervene in FX markets as necessary" which is "essential in order to reduce the attractiveness of the Swiss franc investment and thus ease pressure on the currency." The SNB said that the currency "remains highly valued," even in light of the relatively sharp weakening the currency saw from late July. EUR-CHF popped over 60 pips upward, to a six-week high at 1.1529, since settling around the 1.1500 mark. The early-August 32-month peak is at 1.1538. USD-CHF sprang to a three-week high at 0.9688. We have advocating that EUR-CHF will make an eventual return to the SNB's former floor level, at 1.2000.

    [USD, CAD]
    USD-CAD popped to 1.2239 highs from 1.2185 following the U.S. data round at 8:30 EDT. The pairing had steadied between 1.2160 and 1.2190 through the overnight session. WTI crude's pop over the key $50 level put a ceiling on USD-CAD for now, while prospects for more BoC rate hikes will likely continue to support the CAD going forward. The 1.2250 to 1.200 level should provide a top for now.

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