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By XE Market Analysis April 8, 2019 7:03 am
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    XE Market Analysis: North America - Apr 08, 2019

    The Dollar majors has been trading with little direction. Modest Yen strength was a theme during the Tokyo session, with the Japanese currency lifting by between 0.2% and 0.3% concurrently with a turn lower in Asian stock markets. This drove USD-JPY and AUD-JPY to respective six-day lows at 111.35 and 78.96 and EUR-JPY to a five-day low at 124.98. EUR-USD, meanwhile, has plied a narrow range in the lower 1.1200s, consolidating above the 1.1210 low seen on Friday in the wake of the U.S. jobs report, which revealed a blend of strong payrolls but tepid earnings growth. Sterling has seen moderate firmness, recouping some of the declines seen over the last couple of days last week. Cable lifted back above 1.3050 to put in some distance from Friday's 10-day low at 1.2987. UK Prime Minister May is expected to hold further meetings with Labour's Corbyn today amid ongoing efforts to find a cross-party compromise on Brexit. May is due to appear at the EU's emergency Brexit summit on Wednesday with, as things stand, the UK due to exit the EU on Friday, April 12, at 23:00 London time. The situation remains fluid. If the talks with Labour fail, May has committed to putting in a series of Brexit options to Parliament. In stock markets, sentiment has been flagging. The main European indices were mixed-to-lower as of the late London AM session. In Asia, stock markets started strongly, buoyed by the U.S. jobs report along with hints for more Chinese stimulus, which saw the MSCI Asia-Pacific (ex-Japan) index carve out a fresh seven-month high, though markets subsequently turned lower as circulating analyst notes switched attention to the upcoming corporate earnings season. Some major U.S. banks will be among the first bellwethers to show-and-tell this week amid what is expected to be the first quarter of contracting corporate earnings since 2016.

    [EUR, USD]
    EUR-USD has been plying a narrow range in the lower 1.1200s, consolidating above the 1.1210 seen in the wake of the U.S. jobs report, which revealed a blend of strong payrolls but tepid earnings growth, which supported Wall Street while pressuring Treasury yields, in turn keeping a lid on the dollar. Overall, we still see EUR-USD as remaining in a bear trend, which has been at play since February last year. Support comes in at 1.1176-80 and resistance at 1.1282-85.

    [USD, JPY]
    Modest yen strength was seen during the Tokyo session, with the Japanese currency rotating between 0.2% and 0.3% higher concurrently with a turn lower in Asian stock markets. This drove USD-JPY and AUD-JPY to respective six-day lows at 111.35 and 78.96 and EUR-JPY to a five-day low at 124.98. Stock markets started strongly in Asia, buoyed by the U.S. jobs report along with hints for more Chinese stimulus, which saw saw the MSCI Asia-Pacific (ex-Japan) index carve out a fresh seven-month high, though markets subsequently turned lower as circulating analyst notes switched attention to the upcoming corporate earnings season. Some major U.S. banks will be among the first bellwethers to show-and-tell this week amid what is expected to be the first quarter of contracting corporate earnings since 2016. In Japan, the BoJ trimmed its outlook for three of the country's nine regions, which is the biggest number of downgrades in six years. This adds to the list of all-is-not-right in Asia, where a slowing Chinese economy has affected economies across the region.

    [GBP, USD]
    Sterling has seen moderate firmness, recouping some of the declines seen over the last couple of days last week. Cable lifted back above 1.3050 to put in some distance from Friday's 10-day low at 1.2987. UK Prime Minister May is expected to hold further meetings with Labour's Corbyn today amid ongoing efforts to find a cross-party compromise on Brexit. The potential compromise that May and Corbyn appear to be working on is the former's Withdrawal Agreement plus a guarantee the UK would remain in the EU's customs union in the future, which would both satisfy Labour demands while obviating the need for an Irish backstop. The situation remains fluid. If the talks succeed, then the UK would be set to leave on May 22, ahead of European Parliament elections on May 23. If the talks fail, May has committed to putting in a series of Brexit options to Parliament. If these options fail to produce a consensus, and one which would satisfy EU criteria for agreeing on a further delay, then a referendum or general election may be the only viable ways forward. May is due to appear at the EU's emergency Brexit summit on Wednesday with, as things stand, the UK due to exit the EU on Friday, April 12, at 23:00 London time.

    [USD, CHF]
    EUR-CHF has gained for a sixth consecutive day in reading a 19-day high at 1.1233, extending the rebound from the eight-month low seen last week at 1.1162. The rotation high has reflected broader Euro gains this week, which have bee aided by some above-forecast economic data out of the Eurozone, and increased odds for the UK to be heading to a "soft" version of Brexit. SNB member Maechler said this week that while the Swiss economy remains dynamic and the global economy should remain solid, inflation pressures remain very weak and the environment is fragile, which continues to warrant expansionary monetary policy. The EUR-CHF 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 has consolidated in the upper 1.3300s since printing a 10-day high on Friday at 1.3403, which was seen in the wake of the U.S. and Canadian employment reports. Fresh trend highs in oil prices have been presenting the pair with headwinds. USD-CAD has support at 1.3307-10.

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