Home > XE Currency Blog > XE Market Analysis: North America - Mar 26, 2019

AD

XE Currency Blog

Topics6203 Posts6248
By XE Market Analysis March 26, 2019 7:16 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4238
    XE Market Analysis: North America - Mar 26, 2019

    The main theme has been Yen weakness, which took hold during the European AM session. This floated USD-JPY to a two-session high at 100.42, putting in a little more distance form the six-week low that was seen yesterday at 109.70. AUD-JPY and EUR-JPY, among other Yen crosses, have also risen, with the Japanese currency seeing some of its safe-haven premium unwind concurrently with a steadying in global stock markets, although sentiment remains palpably fragile as investors continue to fathom the recent sharp dive in U.S. yields and yield curve inversions. Above-forecast French business confidence and German Ifo survey outcomes, in data release today and yesterday, respectively, have been tonic for markets, and participants will be looking to today's U.S. consumer confidence and housing-related data for indication that things may not be as bad as feared in the American economy. In Japan today, the BoJ released its "Summary of Opinions" from the March policy meeting, which argued for "maintaining powerful monetary easing." EUR-USD has continued in a narrow range in the lower 1.1300s, remaining about 50 pips net lower from levels prevailing ahead of the Fed's statement last week, with the foray of Bund yields into negative territory having offset the sharp drop in U.S. yields. Sterling has traded modestly firmer, with Cable printing a four-session high at 1.3251. The UK Parliament's wresting of control of the Brexit process from the Prime Minister May's government, while dramatic, has improved the odds for a "softer" Brexit eventuality.

    [EUR, USD]
    EUR-USD has maintained a narrow range in the lower 1.1300, and remains about 50 pips net lower from levels prevailing ahead of the Fed's statement last week, which reaffirmed the dovish turn it made in January and sparked a near 18 bp dive in the 10-year T-note yield and yield inversions, most notably a brief dip to a negative spread between 3-month and 10-year yields, which is generally seen as a harbinger of recession. One reason the dollar has managed to hold up is because it has been seen as a safe haven, especially with Bund yields having turned negative. Sentiment about the global economy remains fragile. An improvement in French business confidence data today, and yesterday's above-forecast German Ifo surve, have been tonic for nervous investors, who will be looking to today's U.S. consumer confidence and housing-related data for indication that things may not be as bad as feared in the American economy. EUR-USD is settled below the midway level of the 1.1177-1.1570 range that's been seen since the start of the year. We expect the directional bias will remain to the downside, with incoming U.S. data to show relative robustness of the economy. EUR-USD has resistance at 1.1343-45.

    [USD, JPY]
    USD-JPY has lifted to a two-session high of 100.42, putting in a little more distance form the six-week low that was seen yesterday at 109.70. AUD-JPY and EUR-JPY, among other Yen crosses, have also traded firmer. The Japanese currency has seen some of its safe-haven premium unwind concurrently with a steadying in global stock markets, although sentiment remains palpably fragile as investors continue to fathom the recent sharp dive in U.S. yields and yield curve inversions. Above-forecast French business confidence and German Ifo survey outcomes, in data release today and yesterday, respectively, have been tonic for markets, and participants will be looking to today's U.S. consumer confidence and housing-related data for indication that things may not be as bad as feared in the American economy. In Japan, the BoJ released its "Summary of Opinions" from the March policy meeting. This argued for "maintaining powerful monetary easing" in order to sustain momentum for hitting its price goals. The BoJ aimed to keep current policy intact, while watching economic developments and keeping an eye out for the side-effects of stimulus, also ensuring that the fiscal and monetary policy mix is maintained. USD-JPY has resistance at 111.05-07, and support at 110.00.

    [GBP, USD]
    The Pound has continued to hold up well amid ongoing Brexit-related political drama in the UK. Yesterday the government was defeated by 329 votes to 302 on a cross-party amendment setting up a series of indicative votes aimed at developing an alternative plan to Prime Minister May's deal. A third vote on May's deal still hasn't been ruled out, though the lack of an announcement suggests that May has not been able to drum up sufficient support for it. With 30 of May's own Tory MPs, including thee ministers, voting against the government May's deal looks all but dead. A series of votes will take place on Wednesday in the House of Commons. Sterling, although coming under some pressure over the last week or so, continues to hold about a 4% averaged gain versus the dollar, euro and yen on the year so far. Should a cross-party consensus take hold, which looks to have a reasonable chance, this would lift the odds for a softer version of Brexit, which would likely entail a significant delay for such a plan to be developed and negotiated with in Brussels. It could improve the odds for a second referendum on EU membership, too, depending how things evolve.

    [USD, CHF]
    EUR-CHF has settled in the lower 1.1200s after diving sharply last week to a 10-week low at 1.1212. The rotation lower was a reflection of a broader decline in the Euro, which came amid disappointing Eurozone data (especially the preliminary March PMI survey readings) and a sharp drop in Bund yields, which saw the 10-year benchmark yield go negative for the first time since 2016. 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 has settled moderately lower after peaking at a two-week high at 1.3444 yesterday. Friday's 2.5%-plus rout in oil prices coupled with a miss in Canadian retail sales data had sparked selling of Canadian Dollars. The broader risk-off theme in global markets has also been weighing on Canadian currency, along with its Dollar bloc brethren. USD-CAD has support at 1.3358-60.

    Paste link in email or IM