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By XE Market Analysis March 15, 2018 4:51 am
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    XE Market Analysis: Europe - Mar 15, 2018

    The dollar has traded mixed to far today, losing ground to the yen but moderately gaining versus most of the other main currencies, including the euro, sterling and Australian dollar. The biggest loser was the Kiwi dollar following an underwhelming GDP figure out of New Zealand, with the antipodean currency showing a decline of 0.3% heading into the London interbank open, although off its lows. USD-JPY fell to a six-session low of 105.78, while EUR-JPY, AUD-JPY, and other yen crosses, also declined, though the downside progress was crimped as Asia stock markets lifted out of intraday lows, and the principal U.S. and European equity indexes posted gains. The Nikkei closed with a fractional 0.12% gain. BoJ Governor Kuroda was again talking up prevailing monetary stimulus, arguing it is helping improve the productivity in the non-manufacturing parts of the economy, which he said is essential for Japan's economic outlook, and that the BoJ will continue with "powerful" monetary easing. How Trump's trade was evolves will remain a principal focus for market participants.

    [EUR, USD]
    EUR-USD has become entrenched in a range in the mid 1.2300s after failing to sustain gains above 1.2400 in the prior two sessions. EUR-JPY and other euro crosses have been under some pressure I in recent sessions amid a broader euro dip. Sub-forecast Eurozone industrial production data yesterday, with the January figure contracting 1.0% m/m versus the median for a 0.2% decline, added to euro selling impetus. In the bigger view, EUR-USD has remains mired at midway levels of a range that's been seen since late January, which marks a consolidative phase after rallying out of sub-1.1600 levels that were seen last November. Support is at 1.2275.

    [USD, JPY]
    USD-JPY fell to a six-session low of 105.78, while EUR-JPY, AUD-JPY, and other yen crosses, also declined, though the downside progress was crimped as Asia stock markets lifted out of intraday lows, and the principal U.S. and European equity indexes posted gains. The Nikkei closed with a fractional 0.12% gain. BoJ Governor Kuroda was again talking up prevailing monetary stimulus, arguing it is helping improve the productivity in the non-manufacturing parts of the economy, which he said is essential for Japan's economic outlook, and that the BoJ will continue with "powerful" monetary easing. USD-JPY is down this week but has so far remained in a consolidative pattern that's developed over the last four weeks, which has followed a down phase from levels above 113.00 that were seen in early January. We anticipate more of the same for now, but see greater risks for USD-JPY declining to 100.00 than climbing to 110.00 on the assumption that we'll see more equity market turmoil as markets digest trade wars and, should this prove to be less vicious than feared, then the removal of crisis-era monetary stimulus by the Fed, BoJ and other key global central banks. USD-JPY has near-term support at 105.58-60.

    [GBP, USD]
    Cable has held broadly underpinned in the upper 1.3900s though so far the market has been lacking the impetus for a push on 1.4000, where decent selling interest is reportedly lying in wait. British PM yesterday announced measures against Russia in response to the attempted assignation of an ex-Russian double agent, though to little impact on the pound. Cable is roughly trading at the midway point of a choppy sideways range that's been persisting since late January, and we expect more of the same for now. This is little data on the UK calendar this week, and while Brexit-related noise continues apace, there hasn't been clear directional leads for the pound. The EU leaders' summit on March 22nd-23rd is the next key date, which will be the venue where the EU 27 will look to sign off on group guidelines on forming a future trading deal with the UK. The next data of note will be February inflation figures, due next Tuesday.

    [USD, CHF]
    EUR-CHF has settled in a narrow-ranged consolidation near the 1.1700 level following the early-March break higher from sub-1.1500 levels. A seven-week high was logged last Thursday at 1.1741. The SNB today is expected to announce unchanged policy, and reaffirm its commitment to monetary stimulus to keep what it still considers a richly-valued currency on a back foot. EUR-CHF rallied some 10% from mid last year, has been emblematic of the euro's recovery over the last year, with the franc unwinding latent safe haven premium as existential uncertainties under the Eurozone and EU come off the boil. Even though Eurosceptic parties won about 50% of the vote in Italy's recent general election, there forming political alliance, led by La Lega, has said Italy will remain in the EU and retain the euro.

    [USD, CAD]
    USD-CAD has this week lifted to the mid-to-upper 1.29s from lows near 1.2800. BoC Governor Poloz said on Tuesday that the unwinding of monetary stimulus would "remain cautious," which along with softer oil prices, have pushed the Canadian dollar lower. Reports that Trump will expand his tariff list is also a potential bearish consideration for the Loonie. We also anticipate that upcoming Canadian data releases will be consistent with the BoC's slow-go approach to policy normalization. Manufacturing shipments (due Friday) are expected to fall 1.0% in January (m/m, sa) after the 0.3% dip in December, with our projection driven by the 2.1% tumble in export values revealed in the January trade report. Q4 net worth (up today) will be closely watched as the report contains the debt-to-disposable income ratio. The ratio saw a record high 171.1% in Q3, and could move even higher in Q4 to underpin the elevated degree of sensitivity household have to higher interest rates. USD-CAD technically remains in an uptrend, which has been in play since late January. Trend support comes in at 1.2830..

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