Home > XE Currency Blog > XE Market Analysis: Europe - Feb 14, 2018

AD

XE Currency Blog

Topics5574 Posts5619
By XE Market Analysis February 14, 2018 2:48 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 3755
    XE Market Analysis: Europe - Feb 14, 2018

    The dollar continued to deflate, led by ongoing and relatively hefty decline in USD-JPY, which has declined for a fifth straight session and is heading into the London AM session with a 0.5% loss on the day so far. The yen's outperformance also continued to weigh on yen crosses, which many are taking as portending further heightened bouts of volatility in global markets, even as most equity markets have taken consolidative tone over the last day. USD-JPY logged a low earlier in Tokyo trading at 106.84, which is the lowest level seen since November 2016. EUR-USD lifted to a five-session peak of 1.2392. There are market narratives pointing to the release of U.S. CPI data later today as likely to evidence still-lacklustre price pressures. Indeed, we expect headline U.S. CPI to dip to 1.8% y/y in January from 2.1% y/y December, although given the prevailing sentiment, any unexpected acceleration would likely be a strong dollar buying cue. Japanese growth data today disappointed, with Q4 GDP falling to 0.5% q/q growth in they seasonally adjusted annualized figure, off the median forecast of 0.9% growth.

    [EUR, USD]
    EUR-USD ascended to a five-day high of 1.2392 as the dollar continued to deflate, led by pronounced USD-JPY declines. Market participants are looking to the release of U.S. CPI data later today as likely to evidence still-lacklustre price pressures. Indeed, we expect headline U.S. CPI to dip to 1.8% y/y in January from 2.1% y/y December. This is keeping the dollar under the cosh. And given the prevailing sentiment, any unexpected acceleration would likely be a strong dollar buying cue as signs of rising price pressures would be seen as the final show to fall for the Fed to fully commit to a cyclical tightening schedule. EUR-USD support is at 1.2335, and resistance is at 1.2425-27.

    [USD, JPY]
    USD-JPY is down for a fifth straight session, logging a low earlier in Tokyo trading at 106.84, which is the lowest level seen since November 2016. The breach of 107.00 is reportedly significant, having being a massive option barrier level. Yen crosses are mostly lower, too, albeit by comparatively moderately degrees. EUR-JPY ebbed to a three-session low of 132.36, and AUD-JPY also forayed into three-session low terrain. This comes amid a backdrop of mixed equity markets in Asia, where Japanese markets have continued to decline, with the Nikkei 225 closing with a 0.5% loss, contrasting to the 1%-plus gains that the main indexes in South Korea and Hong Kong have seen, while, in the case for USD-JPY, there are market narratives pointing to the release of U.S. CPI data later today as likely to evidence still-lacklustre price pressures (given this sentiment, any unexpected acceleration would likely be an explosive dollar buying cue). Japanese growth data today disappointed, with Q4 GDP falling to 0.5% q/q growth in they seasonally adjusted annualized figure, off the median forecast of 0.9% growth and with Q3 revised lower, to 2.2% from 2.5%.

    [GBP, USD]
    Cable lifted to a three-session of 1.3924 on the back of general dollar softness. The pound has fared less well versus other currency, trading at two-month lows in the case against the yen and at one-month lows versus the euro, with the UK currency failing to sustain gains that were seen after yesterday's above-forecast UK CPI data. This rise-and-fall price action is similar to that seen in the wake of last week's BoE policy announcement and inflation report. Underlying uncertainty about the Brexit negotiation process, which was a point of emphasized contingency for the BoE last week in context of its upgraded growth forecasts, has been feeding a sell-into-rallies theme for sterling. Next UK data of note will be January retail sales figures, on Friday. Brexit negotiations, which are in a crucial phase, will likely remain a wild card font of volatility for sterling.

    [USD, CHF]
    EUR-CHF broke lower last week, leaving a four-month low at 1.1446. The cross has since settled in the lower 1.1500s. We expect directional bias to remain to the downside while the risk-off phase persists. The cross is seeing its biggest correction seen since the Swiss franc started to trend lower in mid last year, reflecting EUR-USD declines amid dollar outperformance and euro selling amid the ECB's evident disquiet about the extend of the euro's recent rally, which looks to have had a dampening impact on hawkish voices at the ctral bank. There is also some concern appearing in market research notes about the Italian election in early March, given the popularity of anti-EU Northern League.

    [USD, CAD]
    USD-CAD has gained come 3 big figures from the lows seen in late January and early Februray. The stellar U.S. January jobs report lit a fire under the U.S. dollar. The data, having rekindled expectations for Fed tightening, also sparked a spike on sovereign yields and a risk-off theme in global equity and commodity markets, including oil prices. This is a supportive backdrop for USD-CAD, and we expect the pair to remain underpinned this week. Support is at 1.2475-76..

    Paste link in email or IM