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By XE Market Analysis April 19, 2017 7:50 am
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    XE Market Analysis: North America - Apr 19, 2017

    The dollar lifted versus the yen, and was near net unchanged versus the euro and sterling, among other currencies, heading into the New York interbank open. EUR-USD edged out a new three-week high at 1.0737, surpassing yesterday's peak by a pip. USD-JPY recouped to the upper 108.0s from sub-108.50 levels. The narrow USD index managed to log a fresh three-week low at 99.45, making today the fifth out of the last six sessions a lower low has been seen, although the index has since lifted some. The pound settled in the lower 1.28s versus the dollar after rallying strongly yesterday on the PM May's call for a snap general election in June. Although off its 1.2908 six-month high of yesterday, Cable is still showing a 2%-plus gain on the week. The FT's poll tracker points to a landslide victory that would greatly increase the Tory Party's majority, which, the thinking goes, would dilute the influence of the hard right on May, giving her more flexibility in Brexit negotiations.

    [EUR, USD]
    EUR-USD edged out a new three-week high at 1.0737, surpassing yesterday's peak by a pip. Recent softness in the dollar has been concomitant with an ebb in Fed tightening expectations. Fed funds futures are presently implying about 42% odds for a 25bp rate hike in June, down from about 70% in late March. The French presidential election on Sunday will dominate euro markets from now on in, with two anti-EU candidates, Le Pen and Melenchon, polling over a combined 40%. We expect the euro to be a sell on rallies in the meantime.

    [USD, JPY]
    USD-JPY recouped to the upper 108.0s from sub-108.50 levels. A five-month low was logged at 108.12 on Monday. Tensions remain high on the Korean peninsular, a backdrop that should keep USD-JPY, which correlates inversely during phases of heightening North Korean concerns, a sell on rallies.

    [GBP, USD]
    The pound settled in the lower 1.28s versus the dollar after rallying strongly yesterday on the PM May's call for a snap general election on June 8. The FT's poll tracker points to a landslide victory that would greatly increase the Tory Party's majority, which, the thinking goes, would dilute the influence of the hard right on May, giving her more flexibility in Brexit negotiations. There is also the view that government won't have to call an election until three years after actual Brexit in 2017, which should increase the odds for a post-single market transitional period to allow time for new trading terms to be hammered out. Cable clocked a six-month high at 1.2908 yesterday, and has since consolidated lower but still with a 2%-plus gain on the week. We expect the pair to establish a range in the low 1.30s.

    [USD, CHF]
    EUR-CHF has drifted back under 1.0700 in recent sessions. The February-8 low at 1.0632 provides a downside reference point, which is lowest level traded since last June. Recent declines have reflected broader euro weakness following the ECB's walk back of market speculation that the central bank might have been preparing to switch out of its dovish guidance at its policy meeting next month. There is also political risk into France's presidential elections. EUR-CHF support is at 1.0677, and resistance is at 1.0720-25.

    [USD, CAD]
    USD-CAD rose to a nine-day high at 1.3412, extending the recovery from last week's six-week low at 1.3223. Softer oil prices have been weighing on the Canadian dollar. Support is at 1.3263-1.3284.

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