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By XE Market Analysis August 14, 2019 7:24 am
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    XE Market Analysis: North America - Aug 14, 2019

    The Yen rallied during the London morning session, recouping a portion of the losses seen yesterday after President Trump's partial de-escalation of his trade war with China. Data showing the slowest rise in Chinese industrial production in 17 years, along with a -0.1% q/q print in German Q2 GDP, spooked markets anew, sparking a sharp downward turn across European equity bourses and in S&P 500 futures. USD-JPY dropped to a 106.12, extending the retreat from yesterday's post-Trump-announcement high at 106.97. EUR-JPY, AUD-JPY and other Yen crosses have seen similar price actions. EUR-USD, meanwhile, saw modest rotation higher, returning the pair to around 1.1180-85 after printing a two-day low at 1.1165, which is just 3 pips short of the nine-day low seen on Monday. The pair declined from levels above 1.1200 yesterday following President Trump's partial de-escalation of his trade war with China, which catalysed dollar buying on the view that it would take the pressure off the Fed. The Pound lifted a little as markets digest a potentially significant development of the speaker of the House of Commons, John Bercow, stating that he will fight to stop PM Boris Johnson from shutting (aka proroguing) parliament as a means to force through a no-deal Brexit. Cable lifted above 1.2080 from levels near 1.2850, and EUR-GBP drifted towards 0.9250 from levels above 0.9280.

    [EUR, USD]
    EUR-USD has seen a modest rotation higher, returning the pair to around 1.1180-85 after printing a two-day low at 1.1165, which is just 3 pips short of the nine-day low seen on Monday. The pair declined from levels above 1.1200 yesterday following President Trump's partial de-escalation of his trade war with China, which catalysed dollar buying on the view that it would take the pressure off the Fed. As for EUR-USD, it's not yet clear if the pairing has broken free from the one-week-plus orbit of the 1.1200 level, though we take a bearish view given the ECB's course to easing in September and the risk of a no-deal Brexit. Support is at 1.1160-65.

    [USD, JPY]
    The Yen rallied during the London morning session, recouping a portion of the losses seen yesterday after President Trump's partial de-escalation of his trade war with China. Data showing the slowest rise in Chinese industrial production in 17 years, along with a -0.1% q/q print in German Q2 GDP, spooked markets anew, sparking a sharp downward turn across European equity bourses and in S&P 500 futures. USD-JPY dropped to a 106.12, extending the retreat from yesterday's post-Trump-announcement high at 106.97. EUR-JPY, AUD-JPY and other Yen crosses have seen similar price actions.

    [GBP, USD]
    The Pound lifted a little as markets digest a potentially significant development of the speaker of the House of Commons, John Bercow, stating that he will fight to stop PM Boris Johnson from shutting (aka proroguing) parliament as a means to force through a no-deal Brexit. This should have a suppressing effect on the odds for a no-deal Brexit scenario, as the speaker's role will be crucial in the attempts of the no-to-no-deal and pro-EU members of parliament to stop a no-deal Brexit from happening. Cable lifted above 1.2080 from levels near 1.2850, and EUR-GBP drifted towards 0.9250 from levels above 0.9280. We doubt there will be much follow-through as markets will still be demanding a significant discount on sterling into what is shaping up to be a final showdown between anti-no-deal members of parliament and the pro-no-deal Brexiteers, which include Prime Minister Boris Johnson and his cabinet (who lead a weak minority government with a working majority of just one, and with a portion of their own Tory members disposed to stopping a no-deal eventuality, but who will be galvanized by some favourable polling). The battle will commence on September 3, when parliament returns from summer recess.

    [USD, CHF]
    EUR-CHF rallied at the prompt of news that President Trump is delaying new tariffs on Chinese goods, which drove an unwinding in the Swiss currency's safe haven premium. The cross printed a rebound high at 1.0922 after making a 25-month low at 1.0841. We retain a bearish view of the cross given ECB's course to additional monetary stimulus in September, and the risk of a disorderly no-deal Brexit on October 31.

    [USD, CAD]
    USD-CAD has settled back under 1.3250, down on the six-day high seen yesterday at 1.3293. The revival in risk appetite in global markets, which brought a near 5% rally in oil prices, has returned some demand to the Canadian currency. USD-CAD support comes in at 1.3207-10.

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