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By XE Market Analysis October 11, 2018 3:15 am
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    XE Market Analysis: Europe - Oct 11, 2018

    The Dollar has traded weaker during the Asian session, into the European opening. The has seen EUR-USD climb to the mid 1.1500s and USD-JPY post a three-week low at 111.97. EUR-JPY and AUD-JPY have both seen one-month lows, amid Yen safe-haven outperformance as global stock markets are routed. The Nikkei 225 closed 3.9% for the worse, while the Shanghai Composite is showing a loss of 4.7%, as of the mid-PM session there. This follows Wall Street's worst day in over eight months yesterday, with S&P 500 futures extending lower by a further 1% in overnight trading. We advise buying into Dollar weakness, as we expect the U.S. currency will win out as a haven currency should equity market turmoil persist.

    [EUR, USD]
    EUR-USD climbed to the mid 1.1500s. We advise buying into Dollar weakness, as we expect the U.S. currency will win out as a haven currency should equity market turmoil persist. Italy also remains a problem for the euro. EUR-USD has support at 1.1506-08.

    [USD, JPY]
    USD-JPY has posted a three-week low at 111.97, and EUR-JPY and AUD-JPY have both seen one-month lows. Yen outperformance, although relatively moderate, drove the moves amid a backdrop of plunging stock markets, which has seen the Japanese currency pick up safe haven demand. Wall Street saw its worse day in over eight months yesterday, with the S&P 500 closing with a 3.3% loss, and S&P 500 futures have extended lower by a further 1% in overnight trading with Asian markets hit hard. Japan's Nikkei is down 4.4% heading into the Tokyo close while the Shanghai Composite is off by 4.6% in the first hour of trading after the lunch break. The rise in U.S. and global yields over the last week, which has come amid signs that inflation is making a return, is getting principal blame in market narratives (while Trump blamed the "crazy" Fed), in what seems like a post-financial crises watershed. The consequences of trade protectionism is also in the mix. More of the same seems likely.

    [GBP, USD]
    Cable is softer today after rising in four of the last five sessions, which left a three-week high at 1.3244. EUR-GBP, meanwhile, is steady after posting a four-month low at 0.8723. Recent gains have reflected some positive noises on the Brexit front. A London Times article yesterday claimed that 30 Labour party MPs will reportedly back Prime Minister May's Brexit plan, suggesting that there could be enough votes for the plan to pass a parliamentary vote (as this would offset rebels in May's own Tory party who are planning to vote against it). There still remains much uncertainty with regard Brexit, not least about how the UK and EU will overcome the Irish border backstop problem (to guarantee a free-flowing border in what even Brexit scenario. The government's minister in charge of financial services, meanwhile, John Glen, said that he agreed with BoE estimate of 5k finance jobs being transferred to the continent as a consequence of Brexit. Cable has support at 1.3095.

    [USD, CHF]
    EUR-CHF has settled around the 1.1400 level, up from the nine-day low seen earlier in the week at 1.1369. The gain the cross saw last week reflected a pricing-out of safe haven positioning after the Italy's coalition government produced a EU-appeasing budget, although concerns remain. EUR-CHF has resistance at 1.1415-18.

    [USD, CAD]
    USD-CAD rallied to a two-week low of 1.3070. A 3%-plus dive in oil prices over the last day has taken a toll on the Canadian Dollar, while last Friday's dual releases of September employment reports out of the U.S. and Canada were on balance bullish for the pairing (taking into account the strong back revisions to the U.S. report, which offset an underwhelming headline). USD-CAD has support at 1.2893-95.

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