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By XE Market Analysis January 16, 2019 3:45 am
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    XE Market Analysis: Europe - Jan 16, 2019

    The Dollar majors have been plying narrow ranges so far today. Cable, after surging well over 1% to a peak of 1.2890 following the expected Brexit deal rejection by the UK's parliament, has settled near 1.2850. Much political uncertainty has now fallen upon the UK. The Labour opposition has tabled a confidence vote in Prime Minister May's government, which is expected to be held at 7 PM in London (15:00 ET) today, but it's highly likely she will survive as members in Northern Ireland's DUP and the Conservative party, including the rebels, have indicated they will back the prime minister in order to head-off there being another general election. May will then be obliged to return to parliament with a Plan B, or various Plan Bs, although it's unlikely that members will be capable of finding agreement, which is why we think a new referendum on EU membership is likely. Elsewhere, EUR-USD has settled around 1.1400 level, which roughly marks the midway point of a broadly sideways, at times choppy range that's been unfolding for nearly three months now. We expect the pair to retain a downside bias for now, given the backdrop of Eurozone-slowing narrative. USD-JPY has remained entrenched in a narrow range in the mid 108.0s.

    [EUR, USD]
    EUR-USD has settled around 1.1400 level, which roughly marks the midway point of a broadly sideways, at times choppy range that's been unfolding for nearly three months now. We expect the pair to retain a downside bias for now, given the backdrop of Eurozone-slowing narrative. Support is at 1.1382-84.

    [USD, JPY]
    USD-JPY has remained entrenched in a narrow range in the mid 108.0s. We expect continued choppy price action with an overall downside bias for USD-JPY as the various challenges facing the global economy evolve -- Sino-U.S. trade dispute, less accommodative liquidity, slowing growth. The pair has resistance at 109.10-12.

    [GBP, USD]
    Cable, after surging well over 1% to a peak of 1.2890 following the expected Brexit deal rejection by the UK's parliament, has settled near 1.2850. Much political uncertainty has now fallen upon the UK. The Labour opposition has tabled a confidence vote in Prime Minister May's government, which is expected to be held at 7 PM in London (15:00 ET) today, but it's highly likely she will survive as members in Northern Ireland's DUP and the Conservative party, including the rebels, have indicated they will back the prime minister in order to head-off there being another general election. May will then be obliged to return to parliament with a Plan B, or various Plan Bs, although it's unlikely that members will be capable of finding agreement, which is why we think a new referendum on EU membership will prove the route of least resistance. This would mean Brexit will be delayed beyond the official leave date of March 29, as it will take at least three months to stage a referendum, and open the possibility of a let's-call-the-whole-Brexit-thing off scenario. A "hard" Brexit also remains a possibility as this is likely to be offered in the event of a new referendum. We think talk of a disorderly no-deal Brexit is overblown as the vast majority of members of parliament are strongly against letting this happen.

    [USD, CHF]
    EUR-CHF has settled back in the 1.1200s after printing a three-week high at 1.1340 last week. The move was driven by a bout of across-the-board franc selling, which came amid rumours of SNB intervention, which, if this was the case, would look to have been tactically timed to be in concert with the improved risk appetite in global markets. The cross had earlier in the month punched out a four-month low at 1.1184, which was seen as the Swiss currency picked up safe haven demand amid a bout of turmoil in global markets. The SNB remained firmly on hold at its quarterly policy meeting last month, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency.

    [USD, CAD]
    USD-CAD has settled in the mid 1.3200s, up on the five-day low printed yesterday at 1.3226, which was seen as the Canadian Dollar and its Dollar bloc brethren found support on news that China is implementing tax cuts and other measures to stimulate its economy. USD-CAD has support at 1.3214-15, and resistance at 1.3277-80.

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