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By XE Market Analysis April 12, 2019 4:08 am
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    XE Market Analysis: Europe - Apr 12, 2019

    A strong bid for EUR-JPY was seen at and after the Tokyo fixing today, which drove the Euro generally higher while leading to Yen underperformance. Interbank market narratives pointed Japan’s Mitsubishi UFJ Financial Group's purchase of aviation financing business of Germany’s DZ Bank as being behind the demand. EUR-JPY rose over 0.5% in making a three-week high at 126.33, while USD-JPY was pulled up by about 0.2%, to a four-week peak at 111.85. EUR-USD concurrently gained, too, rising to a 16-day peak at 1.1294, extending a rebound from yesterday's 1.1250 low, which had been the product of a generally firmer Dollar following the release of warmer than expected U.S. PPI data. Sterling has continued to trade net neutrally, with Brexit having been taken off the "of-immediate-concern" list by the Brussels agreement to delay the process for up to six months. BoE Governor Carney said that this reduces the risk for a disorderly no-deal Brexit, which seems the tight assessment.

    [EUR, USD]
    EUR-USD was lifted by a bout of strong demand for EUR-JPY that was seen at and after the Tokyo fix today. Interbank market narratives pointed Japan’s Mitsubishi UFJ Financial Group's purchase of aviation financing business of Germany’s DZ Bank as being behind the demand. EUR-JPY rose over 0.5% in making a three-week high at 126.33, while EUR-USD concurrently to a 16-day peak at 1.1294, extending a rebound from yesterday's 1.1250 low, which had been the product of a generally firmer dollar following the release of warmer than expected U.S. PPI data. In the bigger picture, the pairing is in a bear trend, which has been unfolding since February last year, although downside momentum has abated notably in recent months. Support comes in at 1.1228-30, and resistance at 1.1297-1.1300.

    [USD, JPY]
    USD-JPY was pulled up by about 0.2%, to a four-week peak at 111.85 amid a strong bid for EUR-JPY during the Tokyo session, which was linked to Japan’s Mitsubishi UFJ Financial Group's purchase of aviation financing business of Germany’s DZ Bank. EUR-JPY rose over 0.5% in making a three-week high at 126.33. Today's gains notwithstanding, we expect USD-JPY's bias to be lower, with global stock markets sputtering once again as high valuations look increasingly incongruous with slowing global economic growth, with expectations for a contraction in Q1 corporate earnings in the U.S. in the mix. This backdrop should be conducive of Yen outperformance relative to the other major currencies. USD-JPY has support at 110.84-88.

    [GBP, USD]
    The Pound has continued to trade neutrally on net with the the flexible extension of the Brexit process, with a deadline of October-31, having taken Brexit off the "of-immediate-concern" list with the UK having, for now, avoided a disorderly no-deal exit from the EU. UK Prime Minister May has urged MPs to reflect on Brexit over the Easter holiday, which has invited her critics to suggest that she is the one who should be reflecting given her intransigence to finding a workable compromise in Parliament. The government and Labour will continue to try and find a compromise, though it's not looking likely that May is willing pay the price of splitting her Tory party that striking a deal with Labour would entail. May is coming under fresh pressure to resign, though a Tory leadership challenge at this juncture, which would take months, would not solve anything. Given recent and past form, there is evidently a risk that the Brexit delay won't fix the political gridlock and we simply arrive at October 31 -- dubbed the Halloween deadline in the UK media -- in the same state of irresolution. But, attitudes in the EU are hardening, and UK public opinion has shifted in favour of there being another referendum on EU membership.

    [USD, CHF]
    EUR-CHF's rally extended to a fresh three-week high at 1.1325, building on the rebound from the eight-month low seen in late March at 1.1162. The rotation higher has tracked gains in EUR-USD. SNB member Maechler said last week that while the Swiss economy remains dynamic and the global economy should remain solid, inflation pressures remain very weak and the environment is fragile, which continues to warrant expansionary monetary policy. The EUR-CHF cross has been seeing choppy directional impulses since the start of the year, often times characterized by bouts of pronounced underperformance in the Swiss franc that have often been accompanied by talk/suspicions of SNB intervention.

    [USD, CAD]
    USD-CAD got a lift yesterday from a combo of 2%-odd dive in oil prices and warmer than expected U.S. PPI data yesterday, the former of which weighed on the Canadian Dollar while the latter of which impacted U.S. versus Canadian yield differentials to the benefit of the U.S. currency. These influencers produced a one-week high in USD-CAD at 1.3395, with the pair having subsequently settled to the mid 1.3300s. The pairing has been oscillating in a choppy sideways range for about a month now. More of the same looks likely. Support comes in at 1.3340, and resistance at 1.3395-1.3400.

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