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By XE Market Analysis March 25, 2019 4:45 am
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    XE Market Analysis: Europe - Mar 25, 2019

    USD-JPY printed a six-week low at 109.70, ratcheting up a week-on-week decline of 1.3%. Sharp equity market losses across bourses in Asia have maintained demand for safe havens, including the Japanese currency. AUD-JPY also posted a six-week low, while EUR-JPY remain heavy, although has so far remained above the two-month low the cross saw late on Friday. The dollar bloc currencies came under some pressure; AUD-USD posted a six-day low at 0.7065 while USD-CAD scaled to a two-week high. EUR-USD, meanwhile, has remained relatively steady, tightly orbiting the 1.1300 level. Sterling has come nuder modest pressure, with Cable pegging an intraday low at 1.3167. On the Brexit front, there has been speculation over the weekend that up to 11 of Prime Minister May's cabinet have threatened to resign unless she steps down, although some senior ministers have denied this amid other speculation that she could be making a deal to quit in return for supporting her EU Withdrawal Agreement. The agreement it set to be voted on for a third time, although there has been no confirmation as yet, and probably wouldn't go ahead unless May sees she has sufficient support for it. Parliament will also have a chance this week to form a consensus on alternative Brexit plans, potentially taking control from the government (unprecedented in modern times) on Brexit. If Parliament were to succeed, this would likely mean a soft version of Brexit and quite possibly subject to a ratifying referendum. This scenario would also entail a lengthly delay before the UK left the EU.

    [EUR, USD]
    EUR-USD has settled to a tight orbit of the 1.1300 level, consolidating after tumbling over the two previous sessions to a two-week low at 1.1273. The pair dropped sharply from a six-week high that was seen last Wednesday at 1.1448. The high was seen after the Fed reaffirmed a dovish-leaning policy stance, while the following correction came as Bund yields tumbled, going negative for the first time since 2016, while preliminary March PMI outcomes for the Eurozone disappointed. Also in the mix of sentiment drivers were above-forecast jobless claims and Philly Fed index data outcomes in the U.S. EUR-USD has retreated back below the midway level of the 1.1177-1.1570 range that's been seen since the start of the year. We expect the directional bias will remain to the downside. Support comes in at 1.1263-65.

    [USD, JPY]
    USD-JPY printed a six-week low at 109.70, ratcheting up a week-on-week decline of 1.3%. Sharp equity market losses across bourses in Asia have maintained demand for safe havens, including the Japanese currency. AUD-JPY also posted a six-week low, while EUR-JPY remain heavy, although has so far remained above the two-month low the cross saw late on Friday. USD-JPY has resistance at 111a.05-07, and support at 110.25-30.

    [GBP, USD]
    Sterling has come nuder modest pressure, with Cable pegging an intraday low at 1.3167. On the Brexit front, there has been speculation over the weekend that up to 11 of Prime Minister May's cabinet have threatened to resign unless she steps down, although some senior ministers have denied this amid other speculation that she could be making a deal to quit in return for supporting her EU Withdrawal Agreement. The agreement it set to be voted on for a third time, although there has been no confirmation as yet, and probably wouldn't go ahead unless May sees she has sufficient support for it. Parliament will also have a chance this week to form a consensus on alternative Brexit plans, potentially taking control from the government (unprecedented in modern times) on Brexit. If Parliament were to succeed, this would likely mean a soft version of Brexit and quite possibly subject to a ratifying referendum. This scenario would also entail a lengthly delay before the UK left the EU.

    [USD, CHF]
    EUR-CHF has settled in the lower 1.1200s after diving sharply last week to a 10-week low at 1.1212. The rotation lower was a reflection of a broader decline in the Euro, which came amid disappointing Eurozone data (especially the preliminary March PMI survey readings) and a sharp drop in Bund yields, which saw the 10-year benchmark yield go negative for the first time since 2016. The 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 rallied to a two-week high at 1.3439. Friday's 2.5%-plus rout in oil prices coupled with a miss in Canadian retail sales data had sparked selling of Canadian Dollars. The broader risk-off theme in global markets has also been weighing on Canadian currency, along with its Dollar bloc brethren. USD-CAD has support at 1.3358-60.

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