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By XE Market Analysis March 22, 2019 7:12 am
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    XE Market Analysis: North America - Mar 22, 2019

    The Dollar traded mixed, gaining sharply agains the Euro following underwhelming PMI data out of the Eurozone, while concurrently losing ground to the Pound, which traded firmer after the EU granted a delay in Brexit. The U.S. currency, meanwhile, also posted gains against the Dollar bloc currencies, which have come under pressure concomitantly with flagging global stock markets and commodity prices, while at the same time losing ground to the Yen, which picked up a degree of safe haven demand. The biggest mover out of the main currencies we keep tabs on is EUR-GBP, which was showing a net decline of 0.8% heading into the New York interbank open. EUR-USD was off by 0.5%, at 1.1307 bid, earlier printing a nine-day low at 1.1288, which was the culmination of a one-big-figure drop, extending the correction from the six-week high that was seen on Wednesday at 1.1448. The Eurozone composite PMI came in at 51.3 in the flash estimate for March, off the median forecast for 52.0 and declining from 51.9 in February. Added to anecdotal evidence of prevailing Brexit-related disruption, a bleaker picture of the Eurozone has taken view. The 10-year Bund yield was down another 3.6 bp, building on yesterday's 4 bp decline. Cable has settled near 1.3150 after recovering from yesterday's 1.3004 low. USD-JPY ebbed back under 110.50 after closing yesterday near 110.80, but had remained above yesterday's six-week low at 110.30. Euro underperformance drove EUR-JPY into 11-day low terrain. Japan's nationwide core CPI undershot expectations at 0.7% y/y in February.

    [EUR, USD]
    EUR-USD has dropped for a second straight day, with today's selling catalyst being sub-forecast preliminary PMI outcomes for the Eurozone. The pair pegged a low at 1.1288 after diving by one big figure before finding a toehold. This extends the sharp drop from the six-week high that was seen on Wednesday at 1.1448. The Eurozone composite PMI came in at 51.3 in the flash estimate for March, off the median forecast for 52.0 and declining from 51.9 in February. Added to anecdotal evidence of prevailing Brexit-related disruption, a bleaker picture has taken view. The 10-year Bund yield is down another 3.6 bp, building on yesterday's 4 bp decline, hitting a 29-month low at 0.002%. Also in the mix of sentiment drivers were yesterday's above-forecast jobless claims and Philly Fed index data outcomes, which helped offset the Fed's reaffirmation of its dovish turn this week. EUR-USD has now retreated back below the midway level of the 1.1177-1.1570 range that's been seen since the start of the year. Support comes in at 1.1263-65. The pair would need to close out today below 1.1324-25 to make this a down week.

    [USD, JPY]
    The yen has been trading neutrally so far today. USD-JPY ebbed back under 110.50 but pre-week markets lacked the muster for a challenge on yesterday's six-week low at 110.30. EUR-JPY dove into 11-day terrain, driven by broader Euro selling following underwhelming preliminary March PMI data out of the Eurozone. Japan's nationwide core CPI undershot expectations at 0.7% y/y in February. The median forecast had been for 0.8% y/y. The data will maintain pressure on the BoJ to persist with ultra accommodative monetary policy, in the seemingly forlorn endeavour to reach its 2% target. The data cast little impact on the yen, although still undermined bearish arguments for USD-JPY following benign inflation data in the U.S. and the Fed's reaffirmed dovish turn. The 10-year JGB yield hit -0.050%, its lowest since November 2016. In equity markets, the MSCI Asia-Pacific (ex-Japan) index hit a fresh six-and-a-half-year high in early trade before retreating. Most indices in Asia are presently nursing moderate declines. Japan's Nikkei 225 closed flat, while China's CSI 300 finished with a fractional 0.1% loss. USD-JPY has resistance at 111.05-07, and support at 110.25-30.

    [GBP, USD]
    The Pound has traded firmer in the wake of the EU granting an extension in the Brexit process. A two-week delay has been stimulated for UK Prime Minister May to get her deal through Parliament or come up with another plan. If the PM's deal is passed, then the UK would have until to May 22 to get the necessary withdrawal legislation done before exiting the EU. Things remain fluid, though one thing is certain is that March 29 has ceased to be Brexit day. A third vote on May's deal, if it happens, would be hard to call. The EU is not likely to make the concessions on the Irish backstop which the DUP and at least 20 of the hardline Brexiteers in the Tory party demand, but faced with the likelihood of Parliament taking control of the Brexit process, they conceivably could be persuaded. The Brexit extension will also buy time for Parliament -- which is by significant majority staunchly against a no-deal scenario -- to wrest control of the Brexit process, which would all by wipe out the risk for a no-deal scenario. There is already a motion that would allow this tabled for Monday. Cable has settled near 1.3150 after recovering from yesterday's 1.3004 low.

    [USD, CHF]
    EUR-CHF dove sharply yesterday to a two-month low at 1.1266, subsequently steadying in the upper 1.1200s. The Euro came under pressure as the 10-year Bund yield hit 28-month lows. The cross has been seeing choppy directional impulses 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.

    [USD, CAD]
    USD-CAD rebounded from recent losses, tracking a broader price action in the U.S. Dollar. Above forecast data out of the U.S., including the latest readings on jobless claims and Philly Fed index, propped up Treasury yields. At the same time oil prices pulled back from fresh trend highs. USD-CAD saw a rebound high at 1.3400 before the pair settled back near 1.3350. Canadian February CPI data will be released today. We expect a 1.4% y/y headline, which would match the January rate. The core measures are expected to hold just under a 2.0% y/y clip in February, consistent with a subdued backdrop for underlying inflation. Retail sales, also up today, has us anticipating growth of 0.3% in January after the 0.1% dip in December. Data in line with expectations should't have much impact on the Canadian Dollar. USD-CAD resistance at 1.3358-60.

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