Home > XE Currency Blog > XE Market Analysis: North America - Jun 22, 2018

AD

XE Currency Blog

Topics5489 Posts5534
By XE Market Analysis June 22, 2018 6:21 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 3686
    XE Market Analysis: North America - Jun 22, 2018

    The dollar came under pressure as stock markets enjoyed a rally, although the MSCI All-Country index still looks likely to close the week lower in a week that trade tensions went next level. The narrow trade-weighted USD index was showing a loss of 0.3%, as of the early PM session in Europe. EUR-USD printed a high of 1.1673, which is the loftiest level the euro has traded at since June 14. Above-forecast composite Eurozone PMI survey readings, in preliminary June data, gave the common currency buoyancy, coming with the dollar already established on a softening track. EUR-USD would need to close today above 1.1608, last week's closing level, to make this only the second up week the pair has seen since mid April. USD-JPY settled near the 110.0 level, consolidating yesterday's losses after the pair posted a five-day high at 1110.75. Cable posted a two-week high of 1.3315, extending the rally seen after yesterday's BoE announcement. The biggest mover of the day has been the Australian dollar, which gained over 0.7% versus the U.S. dollar and by 0.8% against the yen. The antipodean currency is still down on the week, and on the month.

    [EUR, USD]
    EUR-USD rallied over 0.5%, and was up, as of the late AM session in Europe, by 1.4% from the 11-month low that was posted yesterday at 1.1508. The pair has logged a high of 1.1673 so far, which is the loftiest level the euro has traded at since June 14. Above-forecast composite Eurozone PMI survey readings, in preliminary June data, has given the common currency buoyancy, coming with the dollar already established on a softening track. EUR-USD would need to close today above 1.1608, last week's closing level, to make this only the second up week the pair has seen since mid April. We advise caution in following the euro higher as Italian politics has the potential to rock the euro boat, and seemingly on an ongoing basis. In the mix are the rising trade tensions, which are mostly impacting German auto makers. Mercedes-Benz maker Daimler warned yesterday that global trade tensions were already showing their sales.

    [USD, JPY]
    USD-JPY has settled near the 110.0 level, consolidating yesterday's losses after the pair posted a five-day high at 1110.75. The pair is at about the midway point of the broadly sideways range that's been seen over the last two months, with price action having reflected bullish fundamentals during upswings and reflecting demand for the safe haven yen during downswings. More of the same looks likely. While fundamentals may remain unambiguously bullish (contrasting Fed vs BoJ policy paths), the risk of another phase of acute risk aversion in global markets is palpable (worsening trade dispute), will giving the yen -- the forex market's safe haven currency of choice -- a bid.

    [GBP, USD]
    The pound has established a higher trading range in the wake of yesterday's BoE announcement and minutes. Cable has gained over two big figures in making a high of 1.3315. An increased rank of three MPC members calling for a 25 bp hike in the repo rate boosted both UK yields and the pound. Although still outnumbered to the tune of six, the dissenters have put a rate hike as soon as November back on the map. MPC member Ramsden, while voting for no change, has make clear in an media interview earlier in the month that he is a hawk in waiting. The minutes showed that most members are overlooking recent economic soft patch. The BoE made clear in its May Inflation Report that declining spare capacity and low productivity growth meant that gradual and measured monetary tightening will be warranted. We see Cable as more likely to form a range in the lower 1.30s than to commence a sustained rally.

    [USD, CHF]
    EUR-CHF has settled back above 1.1500 after printing a three-week low at 1.1487 earlier in the week. The cross was pressured from levels above 1.1600 in the wake of the ECB's dovish guidance signal of last Thursday. EUR-CHF is now about midway levels of the range that's been seen over the last three weeks. The ECB's policy stance should ensure that the SNB remains resolutely committed to its ultra-accommodative monetary policy setting in an attempt to ward off, or at least limit, franc gains against the euro.

    [USD, CAD]
    USD-CAD has come off the boil after a one-wee run higher stalled at 1.3336 yesterday, which is a one-year high. Choppy oil prices into the OPEC meeting today have cast some impact on the Loonie. Last week's unexpectedly hawkish Fed guidance, a likely easing in oil supply quotas by OPEC and Russia, and ratcheting trade tensions have been a supportive mix of USD-CAD, which we expect to remain the case. Support is at 1.3227-30. Canada released CPI and retail sales data today. We expect CPI to climb to a 2.5% y/y pace in May from 2.2% in April -- a jump that would not alter the BoC's gradualism approach to tightening. We anticipate retail sales rising only 0.1% m/m in April after the 0.6% gain in March.

    Paste link in email or IM