Home > XE Currency Blog > XE Market Analysis: Europe - Apr 23, 2019

AD

XE Currency Blog

Topics6529 Posts6574
By XE Market Analysis April 23, 2019 3:52 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4488
    XE Market Analysis: Europe - Apr 23, 2019

    The Dollar is trading at modestly lower levels relative to the London interbank close last Thursday, which marked the close of liquid forex trading last week. Markets will be returning to full force today following the Easter holiday period. EUR-USD has settled near 1.1250, up from the two-week low seen last Thursday at 1.1226, which was seen following disappointing preliminary PMI data out of the Eurozone. The pair remains down by 0.6% from month-ago levels and is lower by 2% on the year-to-date. USD-JPY came under pressure at the Tokyo fix today, which produced a 12-day low of 111.65, before the pair recouped to net unchanged levels near 112.00. Data out of Japan showed machinery orders down 28.5% y/y in March, affirming the preliminary release, though this didn't have market impact, being a notoriously volatile month-to-month data series. Stock markets in Asia today and on Wall Street yesterday have traded flat, on net, while Chinese markets have been under pressure after the official Xinhua news services reported from a policy meeting chaired by President Xi that monetary policy "neither too tight, nor too loose," which has been taken as a sign that Beijing will slow the pace of policy easing. In the mix has been a 2%-plus surge in oil prices over the last day. Front-month WTI prices earlier hit a fresh six-month high at $66.17. This has come on the back of news that the U.S. will in May end all waivers allowing countries to buy Iranian oil without facing U.S. sanctions. The rise in crude prices lifted the Canadian Dollar, driving USD-CAD to a six-day low yesterday at 1.3335.

    [EUR, USD]
    EUR-USD has settled near 1.1250, up from the two-week low seen last Thursday at 1.1226, which was seen following disappointing preliminary PMI data out of the Eurozone. The pair remains down by 0.6% from month-ago levels and is lower by 2% on the year-to-date. We class the pairing has remaining in a bear trend, which has been unfolding since early 2018. Last week's April Eurozone PMI data eroded recent optimism about prospects for a pick-up in economic growth momentum in Europe. EUR-USD break lower has swung the major trend lows seen in March and early April at 1.1176 and 1.1183 back into scope. The European calendar remains relatively quiet today, but has the advance reading for Eurozone consumer confidence ahead of the German Ifo reading tomorrow, which will be watched carefully for signs on the health of the German economy. Across the pond, the U.S. calendar is loaded with key earnings reports, more data, and supply.

    [USD, JPY]
    USD-JPY came under pressure at the Tokyo fix today, which produced a 12-day low of 111.65, before the pair recouped to net unchanged levels near 112.00. Data out of Japan showed machinery orders down 28.5% y/y in March, affirming the preliminary release, though this didn't have market impact, being a notoriously volatile month-to-month data series. Stock markets in Asia today and on Wall Street yesterday have traded flat, on net, while Chinese markets have been under pressure after the official Xinhua news services reported from a policy meeting chaired by President Xi that monetary policy "neither too tight, nor too loose," which has been taken as a sign that Beijing will slow the pace of policy easing. The focus this week will be on fresh signs that corroborate the return-to-growth picture in major global economies. A continuation of this theme would be supportive of currencies that performer with higher beta characteristics, such as the dollar bloc units, while currencies of the low-yielding safe haven type, such as the yen, would be apt to underperform. USD-JPY has support at 111.54-60, levels which encompasses the prevailing position of the 200-day moving average.

    [GBP, USD]
    Cable edged out a six-week low at 1.2975. EUR-GBP has also been concurrently support, although off recent trend highs. Brexit uncertainty, and the impact it's having on business investment, have become increasing concerns for investors. Recent range lows in Cable are contained within 1.2960 and 1.2987, which mark out a reference support zone.

    [USD, CHF]
    EUR-CHF's impressive rally, now in its fourth week, has continued with the cross printing a fresh trend high of 1.1444. This is the loftiest level seen since early November. The cross has traded higher on each trading day bar two since March 29, raising some suspicion of there having been tactical SNB intervention in the mix. SNB member Maechler earlier in the month said 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 dove to a six-day low yesterday at 1.3335. The low was seem amid a 2%-plus surge in oil prices on news that the U.S. will in May end all waivers allowing countries to buy Iranian oil without facing U.S. sanctions. Front-month WTI prices earlier hit a fresh six-month high at $66.17. Oil prices are up nearly 45% on the year-to-date, which is a boon to Canada's terms of trade given the importance of oil exports. We take a bearish view of USD-CAD on the assumption that oil prices will remain underpinned and the recent return-to-optimism growth picture in major global economies also holds up. The BoC's policy meeting and Monetary Policy Review on Wednesday highlights this week's domestic calendar in Canada. A steady 1.75% policy setting is widely anticipated. As for the growth and inflation outlook, a repeat of the cautious optimism that has prevailed so far this year is expected. Recent economic data has been consistent with the BoC's view that the expansion will resume in the second half of the year after the current "detour" has passed. The recent flow of data has, in our view, eliminated the previously slim chance of a rate cut this year. Our projection remains for a rate hike late in 2020.

    Paste link in email or IM