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By xemarketanalysis April 13, 2018 9:50 am
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    XE Market Analysis: The Dollar Index Steady Amidst U-turns and Paraskavedekatriaphobia

    OVERVIEW

    •  The Dollar Index is buoyed by easing trade war fears and US U-turn on Asia-Pacific trade pact.
    • Market waits for UoM Sentiment data to bring more trading impetus.
    • JPY is the biggest loser as investors shift flows to commodity-focused currencies.

    HIGHLIGHT

    The US Administration made a U-turn on the TPP and does not want to be left out of the party. But it comes with a catch – they want a better deal for the US and this is unlikely to be entertained by the other members.  Equity markets welcomed the news with global indices blinking green, and commodity currencies are on the rally. AUD is up 0.55%. 

    US DOLLAR

    The Greenback is holding onto its tiny gains against the major currencies this morning. Market participants remain cautious after mixed signals were sent out of Washington. Fear of global trade war has subsided and the situation in Syria is expected to handle though diplomatic efforts for now. However, sentiment can swing in other direction, without any prior notice. The Aussie is outperforming its G-10 peers while flows are leaving the JPY which is down 0.35%. The slate is thin in terms of fundamental data. At 10 am ET, investors will take a pulse of the latest UoM Consumer Sentiment. 

    BRITISH POUND

    The Sterling surged to a three month high as investors shift flows to better safe haven alternative currency. Easing trade war fears and a dovish message from the ECB are driving the GBP higher. The outlook is also looking more positive for the Brexit trade negotiations beginning next week. GBP/USD gained 1.17% over the past five sessions and we expect some profit-taking ahead of the weekend.

    EURO

    The EUR/USD remains within a tight range, leaning on the lower end as we move into the final session of the week. There is an uncanny play in the market to keep the pair below 1.24 handle. German Final CPI reading came in line with expectation at 0.4%. Euro-area trade data showed an increase of €18.9 trade surplus in February, compared to +€16.1 billion in February last year. There were muted responses to these incoming data. ECB remains dovish and some members believe there is more slack in the current economy than perceived.

    CANADIAN DOLLAR

    Commodity-related currencies are advancing higher on the back of positive global trade outlook. The Canadian Dollar is in the top spot, having rallied 1.73% this week. A technical break below the 1.25 levels remains key. If it does, USD/CAD pair could go all the way to 1.20 in the medium term. There is no Canadian data today and we expect the pair to trade along underlying market sentiment. 

    AUSTRALIAN DOLLAR

    The Australian clings to the top spot among commodity currencies. The AUD/USD has gained close to 1.40% over the past five trading sessions. De-escalation of trade tensions and rising imports by China is behind the latest Aussie surge. Chinese imports rose 14.4% year-over-year in March.

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