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By XE Market Analysis December 19, 2019 7:09 am
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    XE Market Analysis: North America - Dec 19, 2019

    The dollar drifted moderately lower in quiet trading. EUR-USD lifted out of the one-week low seen yesterday at 1.1110, but remains mired in narrow ranges in what is now the sixth consecutive session trading on a 1.11 handle. USD-JPY also continued to ply narrow ranges, though the pair still managed to scratch out a six-day high at 109.68 during the Tokyo session, which is 2 pips shy of the 17-day high seen last Friday, and 4 pips shy of the seven-month peak seen on December 2. Cable found a footing after plunging by nearly 3.5% from last week's post-UK election rally high at 1.3515 (after UK PM Johnson implied that the no-deal Brexit threat was still an option). The pair's low yesterday was 1.3060, since recovering to the lower 1.3100s, though still remaining over half a big figure below the levels that were prevailing ahead of the election. The BoE's Monetary Policy Committee has amid its final meeting of the year, and will announce in London presently. No change to prevailing settings is widely anticipated, though there will be a focus on the two dissenters, Saunders and Haskell, who last month voted for a 25 bps cut in the repo rate, to see if they will maintain their dovish dissent in light of the strong victory of the Conservative Party at last week's election. Either way, we expect the BoE to remain on a neutral footing heading into 2020, though, with inflation running at three-year lows at 1.5% y/y, comfortably below target, the BoE won't be in any rush shift to a tightening bias. EUR-CHF rebounded back above 1.0900 after posting a new one-month low, at 1.0894, which is the culmination of quite a sharp drop from the seven-week peak of last Friday, at 1.1033. The Australian lifted following an above-forecast rise in employment in data out of the antipodean economy.

    [EUR, USD]
    EUR-USD lifted out of the one-week low seen yesterday at 1.1100, but remains mired in narrow ranges in what is now the sixth consecutive session trading on a 1.11 handle. This has been seen after an eight-month high was posted last week in the immediate wake of the UK election last week, at 1.1199. EUR-JPY and EUR-CHF have also traded lower after seeing respective a six-month and six-week highs, with EUR-CHF posting one-month lows. EUR-USD has been trending lower since early 2018, dropping from levels near 1.2500 and posting a 32-month low at 1.0879 in earlier October, the current nadir of the trend. The pair has since settled in a range marked by 1.0981 and 1.1179. The pricing out of further Fed tightening, after the central bank hiked rates three times, has taken the wind out of the sails of the dollar. The pair will enter 2020 without strong directional impulse. The U.S. economy has been holding up, while the Eurozone economy has stabilized following a soft patch.

    [USD, JPY]
    USD-JPY has continued to ply narrow ranges, though the pair still managed to scratch out a six-day high at 109.68 during the Tokyo session, which is 2 pips shy of the 17-day high seen last Friday, and 4 pips shy of the seven-month peak seen on December 2. We are bullish. The U.S. is enjoying what looks like a goldilocks economy -- growth slower, but still holding comfortably in positive expansion with inflation remaining benign -- while the risk-on vibe in global markets should maintain Japan's yield-hungry investors' confidence in foreign investments.

    [GBP, USD]
    Cable found a footing after plunging by nearly 3.5% from last week's post-UK election rally high at 1.3515 (after UK PM Johnson implied that the no-deal Brexit threat was still an option). The pair's low yesterday was 1.3060, since recovering to the lower 1.3100s, though still remaining over half a big figure below the levels that were prevailing ahead of the election. The BoE's Monetary Policy Committee has amid its final meeting of the year, and will announce at noon in London today. No change to prevailing settings is widely anticipated, though there will be a focus on the two dissenters, Saunders and Haskell, who last month voted for a 25 bps cut in the repo rate, to see if they will maintain their dovish dissent in light of the strong victory of the Conservative Party at last week's election. Either way, we expect the BoE to remain on a neutral footing heading into 2020, though, with inflation running at three-year lows at 1.5% y/y, comfortably below target, the BoE won't be in any rush shift to a tightening bias.

    [USD, CHF]
    EUR-CHF rebounded back above 1.0900 after posting a new one-month low, at 1.0894, which is the culmination of quite a sharp drop from the seven-week peak of last Friday, at 1.1033. The high was seen on news of the strong election victory of the Conservative Party at the UK's election, though the euro, tracking sterling, came back under pressure after UK PM Johnson this week implied that the no-deal threat was still an option.

    [USD, CAD]
    USD-CAD printed a seven-week low yesterday at 1.3102, extending declines in what is the fourth consecutive week of descent. The Canadian dollar has been benefiting from positive developments on both the USMCA and U.S.-China trade fronts. The Fed's removing a forecast for a 25 bps hike in 2020 at its FOMC policy meeting last week also weighed on USD-CAD. Another supportive factor for the Canadian currency is higher oil prices, which up be over 10% from the lows seen in late November. USD-CAD looks likely to continue to trade with a downside bias.

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