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By XE Market Analysis April 15, 2019 6:42 am
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    XE Market Analysis: North America - Apr 15, 2019

    The Dollar has been plying narrow ranges so far against a backdrop of moderately bullish equity markets, in Asia and Europe, and rising sovereign bond yields. EUR-USD has been narrowly orbiting the 1.1300 level, consolidating recent gains from the six-week low at 1.1183, seen on April 2. USD-JPY has been gravitating around the 112.00 level with the pair consolidating the near 1 big figure rally that was seen on Friday, which had been the product of pronounced yen underperformance amid M&A-related flow and a strong risk-on sentiment in global markets, the latter of which was stoked by much better than expected trade data out of China and reassuring corporate earnings figures and guidance. More of this theme looks likely, with investor risk appetite looking likely to hold up amid fresh signs of progress on the U.S.-China trade front. U.S. Treasury Secretary Mnuchin said over the weekend that talks are nearing the final round and would do "way beyond" previous efforts top open China's markets to U.S. companies. Cable, AUD-USD and USD-CAD, among other pairings have also been directionally challenged so far today. The Brexit front has suddenly gone cold thanks to the extension, with its Halloween time limit on October 31, and with UK parliamentarians breaking for the Easter holidays.

    [EUR, USD]
    EUR-USD has been narrowly orbiting the 1.1300 level, consolidating recent gains from the six-week low at 1.1183, seen on April 2. The Dollar weakened on Friday against most currencies as risk appetite picked up. In the bigger picture, EUR-USD is in a bear trend that has been unfolding since February last year, although downside momentum has abated notably in recent months. Support comes in at 1.1280.

    [USD, JPY]
    USD-JPY has been gravitating around the 112.00 level with the pair consolidating the near 1 big figure rally that was seen on Friday, which had been the product of pronounced yen underperformance amid M&A-related flow and a strong risk-on sentiment in global markets, the latter of which was stoked by much better than expected trade data out of China and reassuring corporate earnings figures and guidance. More of this theme looks likely, with investor risk appetite looking likely to hold up amid fresh signs of progress on the U.S.-China trade front. USD-JPY has support at 111.51-55, which encompasses the prevailing position of the 200-day moving average.

    [GBP, USD]
    Cable is entrenched in a narrow range, near 1.3100, while sterling is continuing to trade neutrally, without domestically-driven impulse. The extension of the Brexit process, with its October-31 deadline, has taken Brexit off the "of-immediate-concern" list with the UK having for now avoided a disorderly no-deal exit from the EU. The extra time should enable parliamentary process to bring the tangled issue to some sort of resolution. Following the Easter holiday period, the focus will be on efforts by the government and Labour to find a comprise around the existing EU Withdrawal Agreement, which Labour want to be attached with a commitment for the UK to remain in the EU customs union in the post-Brexit future. Prime Minister May has so far be disinclined to pay the price of splitting her Tory party by acquiescing to Labour's demand. If these talks fail, then the alternative options will be put to Parliament. The government has pledged to implement whatever consensus forms. In this scenario, or in the scenario that Parliament simply fails to find a consensus, then a new referendum would be looking likely. The impact on the the economy from the uncertainty has become increasingly evident. A regular survey from accounting ground Deloitte found that 49% of CFOs anticipate having to reduce capital expenditure and 22% expect having to trim mergers and acquisitions activity. 53% were also expecting to reduce staff hiring because of Brexit, the highest by this metric in over two years.

    [USD, CHF]
    EUR-CHF's rally extended on Friday to a fresh three-week high at 1.1340, building on the rebound from the eight-month low seen in late March at 1.1162. The rotation higher has tracked gains in EUR-USD. SNB member Maechler said last 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 settled in the mid-to-lower 1.3300s. The pair has bene trading without a clear direction for some five weeks now. The recent rise U.S. Treasury yields have offset the Canadian-Dollar-bullish lead of rallying oil prices, which have vaulted to a series of fresh five-month highs in recent weeks. The Canadian calendar shifts into high gear this week after rolling along at a sedate pace last week. There are a variety of top tier reports this week, starting with the BoC's Business Outlook Survey today, and March CPI data tomorrow. The BoC's survey is expected to show an economy still moving along at a decent pace, but facing a number of challenges. This is a key report for the upcoming BoC announcement and MPR, as the Bank makes frequent references to the findings of the survey. A survey consistent with modest but still respectable growth, well contained inflation expectations and an unwinding in capacity pressures would line-up with our expectation for no change in rates later this month or through year-end. As for CPI, we expect to pop 0.7% (m/m, nsa) in March, driven by a 12% run-up in gasoline prices. CPI is seen running at a 1.9% y/y pace in March from 1.5% in February. USD-CAD has support at 1.3298-1.3300.

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