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By XE Market Analysis April 9, 2020 6:23 am
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    XE Market Analysis: North America - Apr 09, 2020

    Narrow ranges have been prevailing in currency markets ahead of some data and event risk items on today's calendar. Asian and European stock markets mostly gained, while U.S. index futures have flagged. Hopes remain that the peak global coronavirus infection rate may be approaching, which would mark the end of "phase 1" of the pandemic, with "phase 2" being how to exit from lockdowns while there is, as yet, no vaccine or cure. EUR-USD has posted a 42-pip range so far, with a two-day low at 1.0840 marking the downside limit. USD-JPY has been idling in a 26-pip range, with 109.06 marking the upside cap. Cable lifted to one-week highs above 1.2430 on news that the BoE will finance the immediate costs of government crisis spending. UK Prime Minister Boris Johnson remains in intensive care for what is now a fourth day. Official updates report that he has been responding well, but after downplaying his condition ahead of him being admitted to hospital and then an ICU, there is a degree of uncertainty about the accuracy of this. AUD-USD edged out a 24-day high at 0.6250, while USD-CAD posted a range of 1.3999-14056, holding within yesterday's range. Ahead today, attention will be on the recommencement of the EU finance ministers' meeting, at 15:00 GMT (10:00 ET) after yesterday's meeting failed to find an accord on a region-wide fiscal plan to offset the impact of virus-containment measures. The OPEC+ group of oil producing nations will also begin its teleconference meeting, from 14:00 GMT (09:00 ET). Markets are looking for an agreement to slash crude output by 10 mln barrels a day. There is significant scepticism among oil analysts that even a cut of this magnitude would be sufficient to offset the level of recent demand destruction. In the U.S., the weekly jobless claims report will once again take top billing (it's expected to once again paint a dismal picture), along with ongoing deliberations in the U.S. Congress on fiscal relief measures. Note that trading will thin into tomorrow's Good Friday holiday.

    [EUR, USD]
    EUR-USD has posted a 42-pip range so far, with a two-day low at 1.0840 marking the downside limit. Ahead today, attention will be on the recommencement of the EU finance ministers' meeting, at 15:00 GMT (10:00 ET) after yesterday's meeting failed to find an accord on a region-wide fiscal plan to offset the impact of virus-containment measures. Over in the U.S., the weekly jobless claims report will once again take top billing (it's expected to once again paint a dismal picture), along with ongoing deliberations in the U.S. Congress on fiscal relief measures. Note that trading will thin into tomorrow's Good Friday holiday. We expect EUR-USD to remain in a choppy trading pattern, lacking clear directional bias for now.

    [USD, JPY]
    USD-JPY has been idling in a 26-pip range, with 109.06 marking the upside cap. The yen has declined lately amid a backdrop of buoyant global stock markets, with the currency down about 1% from week-ago levels against the both the dollar and euro, and is off by nearly 4% in the case against the Australian dollar. This comes amid hopes that the peak global coronavirus infection rate may be approaching, which could mark the end of "phase 1" of the pandemic, with "phase 2" being how to exit from lockdowns while there is, as yet, no vaccine or cure.

    [GBP, USD]
    Cable lifted to one-week highs above 1.2430 on news that the BoE will finance the immediate costs of government crisis spending. The UK currency has also become apt to correlative positively with risk appetite during the coronavirus crisis era. The incapacitated Boris Johnson, who has entered a fourth day in intensive care, hasn't rattled UK markets unduly, with the Foreign Secretary Dominic Raab deputising as prime minister, and who, while lacking Johnson's political clout, is expected to allow for a collegial leadership with the rest of the cabinet and senior advisors and civil servants. Some big decisions will have to be made soon, including how and when to exit from the lockdown. Regarding the coronavirus in the UK, the infection rate of increase is slowing, though the mortality rate is still rising. The general view is that the lockdown is working, and that this will become increasing evident over the next two weeks. The exit strategy from the lockdown is being debated, as in other countries, though the timing remains uncertain. A phased return to work is likely once the infection rate is in clear retreat, though this would still be contingent on there being a satisfactory supply of relevant medial supplies (protective gear, respirators etc) and testing capacity, which might be one or two months away. The pound, overall, is continuing to trade with relative stability, comfortably above the 35-year low seen against the dollar on March 20th at 1.1409, which was the product of sharp underperformance during the height of mid-March liquidity crunch. The UK currency remains down by about 7% against the dollar on the year-to-date, and down versus most of the other main currencies, although has still gained versus the commodity currencies and other high-beta units over this period.

    [USD, CHF]
    EUR-CHF has continued to gravitate around 1.0550-1.0600, holding above the five-year low that was seen on March 9th at 1.0505. Assuming the coronavirus crisis persists, as looks highly likely, this should maintain Swiss franc's safe haven premium, which at the least should limit upside scope of EUR-CHF. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argues that Switzerland needs a more expansive fiscal policy.

    [USD, CAD]
    USD-CAD has posted a narrow range of 1.4000-14054 so far today ahead of major risk events for the Canadian dollar. Attention will be on the OPEC+ group of oil producing nations, which will begin their teleconference meeting from 14:00 GMT (09:00 ET). Markets are looking for an agreement to slash crude output by 10 mln barrels a day. There is significant scepticism among oil analysts that even a cut of this magnitude would be sufficient to offset the level of recent demand destruction. Canada will release its March employment report, too, which is a day early than normal in light of the Good Friday holiday tomorrow. The consensus expectation is for a whopping 500k drop in the headline figure, with risks firmly pinned to the downside. Overall, we retain a bullish view of USD-CAD.

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