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By XE Market Analysis March 15, 2019 7:03 am
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    XE Market Analysis: North America - Mar 15, 2019

    The Dollar has taken a downward turn, reversing some of the gains the currency saw yesterday. This has seen EUR-USD lift back above 1.1300, although yesterday's 10-day high at 1.1338 has remain unchallenged so far. USD-JPY turned quite sharply lower after printing a nine-day high of 111.90. The decline mostly reflected a bout of dollar weakness, though a report by TASS, a Russian news agency, that North Korea is considering suspending nuclear talks with the U.S. sparked some safe-haven demand for the Japanese currency. The BoJ left policy unchanged at its policy review today, as had been widely anticipated. BoJ Governor acknowledged the impact of trade tensions on the Japanese economy, but commented that China's stimulus is pretty big and will have an impact. He also sound out a defence of the central bank's ultra-accommodative monetary policy settings, saying negative rates held create a desirable yield curve and spoke about the importance of sticking to the 2% inflation target. The Pound lifted out of intraday losses, and has overall been trading steadily in the wake of UK's Parliament voting for an extension in the Brexit process. Cable settled in the mid-to-upper 1.3200s after posting a low at 1.3203. USD-CAD printed a two-day low at 1.3289, which is 2 pips short of the 11-day seen Wednesday.

    [EUR, USD]
    EUR-USD has remained buoyant but the market has so far been lacking the muster to challenge the 10-day high seen yesterday at 1.1338. The intraday high is 1.1329. Soft PPI and CPI data this week imparted a softening bias on the dollar while keeping a lid on U.S. Treasury yields, while the Brexit-related 2% rise in the pound this week has helped buoy the euro against the dollar. EUR-USD is now near net unchanged on the month so far, having rebounded from last week's post-ECB low at 1.1176. We still retain a bigger-picture bearish view of EUR-USD, anticipating the U.S. economy to hold up better than the Eurozone. Last Friday's U.S. jobs report disappointed bigly at the headline level, but components were much better while the low jobs number can be largely attributed to an outsized weather hit through the BLS survey seek, especially in the goods sector overall and construction in particular. The monthly aggregates for February should prove stronger than the data from the BLS survey week, and we expect a solid 230k March payroll bounce. EUR-USD has support at 1.1290.

    [USD, JPY]
    USD-JPY turned quite sharply lower after printing a nine-day high of 111.90. The decline mostly reflected a bout of dollar weakness, though a report by TASS, a Russian news agency, that North Korea is considering suspending nuclear talks with the U.S. sparked some safe-haven demand for the Japanese currency. The BoJ left policy unchanged at its policy review today, as had been widely anticipated. BoJ Governor acknowledged the impact of trade tensions on the Japanese economy, but commented that China's stimulus is pretty big and will have an impact. He also sound out a defence of the central bank's ultra-accommodative monetary policy settings, saying negative rates held create a desirable yield curve and spoke about the importance of sticking to the 2% inflation target. News that the pencilled-in Trump-Xi summit has been pushed out to April at the earliest has crimped risk appetite, although only to a limited degree. In the mix is the risk for a sustained risk-off phase, given the high valuations in global equity markets alongside trade concerns and softening corporate earnings, which in turn would have the potential to generate Yen outperformance. USD-JPY has support at 110.85, and resistance at 111.90.

    [GBP, USD]
    The Pound has been trading steadily in the wake of UK's Parliament voting for an extension in the Brexit process. Another motion, which aimed at taking parliamentary time away from the government, and which would have marked a significant parliamentary power move on Prime Minister May's government, failed narrowly, by just 2 votes. This keeps the embattled May in a position of influence and will curtail, for now, Parliament's ability to explore Brexit ideas that would be capable of gathering a cross-party backing (which would likely be in the form of a "soft" Brexit, whereby the UK maintains a close relationship with the EU, remaining in the customs unions and, possibly, in the single market). May's Withdrawal Agreement will be voted on for a third time next Wednesday, where she is hoping that the fear of a soft, delayed Brexit or Brexit-cancelled scenarios will generate support from the hardline Brexiteers. It should be noted that the possibility for a no-deal Brexit remains, despite this week's indicative votes against it, as primary legislation dictates that the UK will leave on March 29. We don't expect this will happen as Parliament would step in should the government's Withdrawal Agreement fail at a third vote, which would likely deal May a political hammer blow. One risk is that it would only take on veto from the EU 27 member states against agreeing a delay to deny the UK an extension, though the UK would still have the unilateral right to revoke Article 50 and terminate Brexit. This would be a deeply divisive course of action in the UK, but such a move, which seems highly unlikely at this juncture, would almost certainly be accompanied by a legally-binding referendum on EU membership. Sterling is showing a 2.2% gain on the dollar from the lows seen on Monday.

    [USD, CHF]
    EUR-CHF has settled lower, in the mid 1.1300s, after posting a two-week high earlier in the week at 1.1385. The cross has continued on a relatively choppy path, the latest phase of which have been the current rebound after sharp Euro declines following the ECB's lending move last Thursday. The cross has been seeing relatively high volatility since the start of the year, often times characterized by bouts of pronounced underperformance in the Swiss franc that have often been accompanied by talk/suspicions of SNB intervention. SNB vice president, Zurbruegg, said recently that the franc "remains highly valued" and the situation on foreign currency markets is "still fragile" and that the SNB's two pillar strategy of negative interest rates and ad-hoc currency interventions, or threat thereof, "remains appropriate."priate."

    [USD, CAD]
    USD-CAD has remained heavy since printing a 10-day low at 1.3287 on Wednesday, with the pair having tipped back under 1.3300 after a rebound stalled just shy of 1.3350. A downside bias has been persisting since last week's U.S. and Canadian employment reports, which came in with respective worse-than and better-than headline readings. Rekindled oil price gains have also been giving the Loonie an underpinning. The Canadian currency has more than recovered losses seen after last week's dovish turn by the BoC, which stated at its policy review that there is "increased uncertainty about the timing of future rate increases." USD-CAD resistance comes in at 1.3344-77, and support at 1.3260.

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