Home > XE Currency Blog > XE Market Analysis: Europe - Sep 14, 2017

AD

XE Currency Blog

Topics4602 Posts4647
By XE Market Analysis September 14, 2017 3:30 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 3133
    XE Market Analysis: Europe - Sep 14, 2017

    The dollar traded perkily in Asia, spurred on by apparent fresh momentum behind the White House plans for tax reform. Republican congressional leaders talked up an "outline" on reforms by the week of September 25th, and the White House hosted a bipartisan dinner to keep the heat on both sides to step up on reforms. USD-JPY rallied for a fourth straight day, this time making a one-month peak at 110.73, EUR-USD fell into 11-day low terrain under 118.70, and the narrow trade-weighted USD index posted a nine-day high at 92.51. Ahead today are the SNB and BoE policy announcement. Both are widely expected to leave their respective policy settings unchanged. The SNB can be expected to reaffirm its commitment to ultra-accommodative policy, while the vote split and minutes from the BoE's MPC meeting will interest in light of the spike in August CPI data. We anticipate a fairly balance tone in the minutes given yesterday's data showing softer than expected wage data, and given that the impact of post-Brexit vote sterling weakness in buoying y/y inflation data will start to drop off in the months ahead.

    [EUR, USD]
    EUR-USD fell into 11-day low terrain under 118.70 as the narrow trade-weighted USD index posted a nine-day high at 92.51. The dollar buying was spurred on by apparent fresh momentum behind the White House plans for tax reform. Republican congressional leaders talked up an "outline" on reforms by the week of September 25th, and the White House hosted a bipartisan dinner to keep the heat on both sides to step up on reforms. We advice caution as amid concern about North Korea, with Pyongyang's progress toward nuclear ICBM capability generally seen as a negative for the buck. EUR-USD support is at 1.1823-25, which encompasses the August-31 low.

    [USD, JPY]
    USD-JPY rallied for a fourth straight day, this time making a one-month peak at 110.73, and this time spurred on by apparent fresh momentum behind the White House plans for tax reform. This drove broader gains in the dollar. The yen has traded more mixed against most other currencies, gaining notably against the euro and sterling, for instance, but seeing fresh lows against the Australian dollar, other commodity currencies and many emerging market currencies. For USD-JPY, we advise caution, given the risk for fresh antics by North Korea as the rogue nations steams toward nuclear ICBM capability, and given the proven sensitivity of USD-JPY to geopolitical tensions. Support is at 110.20.

    [GBP, USD]
    Cable yesterday pretty much reversed all of the gains seen on Tuesday following the spike in the inflation data. Today's BoE policy announcement will now be a key focus for sterling markets. The Old Lady is widely expected to leave policy settings unchanged. The vote split and minutes from the BoE's MPC meeting will interest in light of the spike in August CPI data (to 2.9% y/y from July's 2.6%). We anticipate an unchanged 7-2 vote spike in favour of leaving the repo rate at 0.25% along with a fairly balanced tone in the minutes given yesterday's data showing softer than expected wage data, and given that the impact of post-Brexit vote sterling weakness in buoying y/y inflation data will start to drop off in the months ahead. Such an outcome would like spark sterling selling. Cable support is at 1.3170 and 1.3183, which are the daily lows from Tuesday and Wednesday, respectively.

    [USD, CHF]
    EUR-CHF ebbed back to the mid 1.14s after yesterday logging a six-week high at 1.1512. This continues a choppy phase in EUR-CHF trading. The SNB meets today amid widespread expectations for unchanged policy, while the statement will almost certainly reaffirm commitment to ultra-accommodative policy settings. SNB boss, Jordan, signalled last week that the central bank remains fully committed to its ultra-accommodative monetary policy settings, saying that he and his colleagues did not know if recent franc weakness, which is desirable from their perspective, would sustain. In the scenario that geopolitical tensions ebb back, we would by bullish of EUR-CHF. Assuming the Eurozone economic revival remains on track, which would help quell ECB angst about euro strength, and assuming the ECB commits to QE policy tapering at some point over the next month or two, we would expect the EUR-CHF to eventually recover to the SNB's former floor level at 1.2000.

    [USD, CAD]
    USD-CAD has settled in the upper 1.21s after leaving a one-week high at 1.2220 yesterday. We anticipate the USD-CAD's downtrend, which has been in place since May, will resume at some point. The Canadian employment report last Friday was supportive of the BoC's path to normalize monetary policy, with policymakers viewing the economy as having escaped the drag from the downside oil price shock of recent years. USD-CAD support is at 1.2115.

    Paste link in email or IM