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By XE Market Analysis August 29, 2019 7:17 am
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    XE Market Analysis: North America - Aug 29, 2019

    The Yen went from outperformer to underperformer after China's commerce ministry affirmed that September trade talks are not off the table. There was a palpable sigh of relief in markets after the Trump administration yesterday made official its extra 5% tariff on $300 bln in Chinese goods imports, affirming collection dates of September 1 and December 15. U.S. Treasury Secretary Mnuchin had already said he was expecting Chinese negotiators to visit Washington. AUD-JPY was biggest mover, and was showing a 0.3% gain heading into the New York interbank open, having been showing a decline of nearly 0.5% at the lows. USD-JPY rallied by nearly 50 pips in posting a three-day peak at 106.35 before settling. Elsewhere, EUR-USD posted a six-day low at 1.1070, making today the fourth consecutive day of losses. The latest dip has been driven by a broader bid, albeit moderate, for Dollars. Sterling has settled after plunging yesterday on news of the UK prime minister's move to suspend Parliament. This has generated a veritable political storm given the timing of it, though the government is operating within the rules. Opposition parties now look certain to attempt to bring down the government by a confidence vote as soon as next week. Cable has settled near 1.2200 after yesterday printing a six-day low at 1.2155. USD-CAD tipped about 30 pip lower to levels around 1.3280, correcting from a six-day high at 1.3319.

    [EUR, USD]
    EUR-USD posted a six-day low at 1.1070, making today the fourth consecutive day of losses. The latest dip has been driven by a broader bid, albeit moderate, for Dollars. The greenback has been holding up well despite record lows in long-end U.S. Treasury yields (notwithstanding today's lift), with the demand for the safe haven of Treasuries itself buoying the currency. On the Euro's side of the scales, the ECB remains on course to increase monetary stimulus settings in September, while the risk of a no-deal Brexit, which has been amplified by the UK prime minister's move to suspend parliament yesterday, and which in the event would be detrimental to the Eurozone economy. We retain a bearish view of EUR-USD. Resistance comes in at 1.1098-1.1100.

    [USD, JPY]
    The Yen has turned lower amid rallying stock markets in Europe after China's commerce ministry affirmed that September trade talks are not off the table. There was a palpable sigh of relief in markets after the Trump administration yesterday made official its extra 5% tariff on $300 bln in Chinese goods imports, affirming collection dates of September 1 and December 15. U.S. Treasury Secretary Mnuchin had already said he is expecting Chinese negotiators to visit Washington, so confirmation from China that another round of talks are on has been tonic for investors. The AUD-JPY cross has seen the biggest magnitude of movement out of the main dollar pairings and associated cross rates today, showing a 0.3% gain on the day at prevailing levels, having been showing a decline of nearly 0.5% at the lows. USD-JPY rallied by nearly 50 pips in posting a three-day peak at 106.35 before settling. The dynamic has been driven by a paring back in the Japanese currency's safe haven premium.

    [GBP, USD]
    Sterling has settled after plunging yesterday on news of the UK prime minister's move to suspend Parliament. This has generated a political storm given the timing of it, though the government is operating within the rules. Opposition parties now look certain to attempt to bring down the government by a confidence vote as soon as next week. Cable has settled near 1.2200 after yesterday printing a six-day low at 1.2155.

    [USD, CHF]
    EUR-CHF has been in sideways and sometimes choppy range for two weeks now, holding above the 25-month low seen on August 15 at 1.0835. The low was a product of increased expectations for ECB monetary stimulus, and partly an increased safe haven premium being placed on the Swiss currency (despite the punishing -0.75% deposit rate). We expect the cross to remain heavy. While sentiment in global markets has improved this week, there remains a skittish undertone as prospects for a thawing in U.S.-China relations seem limited (the Trump administration's agenda appearing to be one of containment rather than the mere seeking of improved trading terms). The the risk of a disorderly no-deal Brexit on October 31 is also a negative for the Euro.

    [USD, CAD]
    USD-CAD printed a six-day high at 1.3319 during the Asian session today, which extended a rebound from the two-week low seen on Tuesday at 1.3225. The pairing has been lacking clear direction over the last three weeks, which follows an ascending phase out of the 10-month low seen in mid July at 1.3109. The evolution of the Trumpian trade war and its impact on the global economy will continue to have directional impact on USD-CAD given the Canadian Dollar's standing as a commodity currency. USD-CAD has support at 1.3270-73.

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