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By XE Market Analysis September 26, 2019 3:01 pm
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    XE Market Analysis: Asia - Sep 26, 2019

    The Dollar came under some broad pressure early in the session, following the release of the whistle blower report and ahead of the testimony of acting DNI Maguire at the House Intelligence Committee. The risk-sensitive USD-JPY slid to session lows of 107.43 from 107.70 into the 8:30 EDT round of data, while EUR-USD rallied to 1.0967, from 1.0925 at the N.Y. open. Equities turned negative, while Treasuries rallied. There was little impact from the in-line GDP revision, jobless claims, and advance trade report. Later in the session, it appeared safe-have flows into the Dollar, due to U.S. political uncertainty, were behind a modest rally, which took EUR-USD to new 28-month lows of 1.0922, and USD-JPY over 108.85. USD-CAD ended near session highs at 1.3275, while Cable steadied over 1.2330.

    [EUR, USD]
    EUR-USD completed its round trip in N.Y. on Thursday, dropping to 28-month lows of 1.0923 into the open, rallying to 1.0962 highs, then printing fresh trend lows of 1.0922 after the London close. The pairing's sell-off came as Dollar demand stepped in on safety flows, likely related to the current climate of U.S. political uncertainty. Fundamentally, the Euro should remain under pressure, as yield and economic growth differentials remain decidedly in favor of the USD.

    [USD, JPY]
    USD-JPY rallied to near 107.90 from early lows of 107.43 in afternoon trade. The pairing, and indeed the Dollar in general had been pushed lower after the open on jitters ahead of the release of the whistle blower report, later rallying to highs on perceived safe-haven buying, on the back of U.S. political angst. The pairing has been unable to crack the 108 mark this week, after approaching the level each day since Monday. Between Iran, China, Ukraine, and U.S. politics, USD-JPY bull will remain cautious.

    [GBP, USD]
    Cable rallied back to 1.2365 highs in N.Y. trade, up on the two-week low seen in London morning trade. The new low extended the correction from the two-and-a-half-month high seen last Friday at 1.2582. On the UK political front, the current situation of the prime minister demanding an out-of-cycle general election and the opposition refusing it is peculiar. The opposition is in part concerned that calling an election before October 19 would leave room for Johnson to trigger a no-deal Brexit before the election has taken place, while they are also wanting to force Johnson to break his "do or die" promise to deliver Brexit by October 31, thinking this will cost him votes at the election. The October-19 date is important as, if Johnson has failed to secure a deal with the EU by then, it is the date that will trigger the new law (the Benn bill) that will extend Brexit to January 31.

    [USD, CHF]
    EUR-CHF steadied above Wednesday's three-week lows of 1.0832 lows seen on Wednesday. The cross has tracked lower since the SNB's policy announcement last week. The SNB kept both interest rates and its language on the currency unchanged, as widely expected. The policy rate and deposit rates were both left at -0.75% and the central bank repeated that that Franc remains "highly valued", while highlighting fragile markets and affirming the commitment to intervene in currency markets if needed. There was one surprise in the statement as the SNB changed the way the negative deposit rate is calculated with a new exemption threshold, designed to reduce costs for institutions as the global low-rate environment has "become more entrenched and could persist for some time yet". This means that the SNB followed the ECB, which also took steps to limit the impact of negative rates on banks, and the step may also prepare the ground for a mid-meeting move in Switzerland should Brexit developments turn sour.

    [USD, CAD]
    USD-CAD rallied out of 1.3232 lows seen early in the session, later moving to 1.3276 highs into the close. Another downdraft in WTI crude prices prompted buyers to step in, while a general USD recovery, seemingly driven by safe-haven flows on the back of U.S. political concerns, provided support as well. For the most part, USD-CAD has been confined between its 200-day moving average at 1.3301, and its 50-day moving average at 1.3236 for the past couple of weeks.

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