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By XE Market Analysis October 18, 2019 7:36 am
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    XE Market Analysis: North America - Oct 18, 2019

    The dollar has been seeing a steady-to-soft price action versus the other main currencies. AUD-USD managed to eke out a fresh one-month high, at 0.6838, despite an ongoing sputtering price action in risk-wary global stock markets. EUR-USD nudged higher after posting an intraday low at 1.1114 and came within a couple of pips of testing seven-week high that was seen yesterday at 1.1139. The pair had been buoyed lately by the improved Brexit picture (deal yet to clear the UK parliamentary vote hurdle, but the risks of a no-deal are much less than they were), which has been a benefit to the euro. USD-JPY has settled above yesterday's two-day low at 108.45. The pound lifted from the mid 1.2800s to around the 1.2900 level against the dollar, though remained below the five-month high seen yesterday at 1.2990. Regarding Brexit, the focus in the UK now is on Saturday's parliamentary vote on PM Johnson's deal with the EU on divorcing terms. It's too-close-to call. The FT was estimating that PM Johnson is three votes shy of having the numbers to pass his Brexit deal at tomorrow's vote in Parliament. This may not be accurate while some members may not have made up their minds yet. Overall, the vote -- which will have existential consequences for the UK -- is too close to call.

    [EUR, USD]
    EUR-USD has nudged back above 1.1130 after posting an intraday low at 1.1114, swinging the seven-week high that was seen yesterday at 1.1139 back into scope. The pair had been buoyed lately by the improved Brexit picture (deal yet to clear the UK parliamentary vote hurdle, but the risks of a no-deal are much less than they were), which has been a benefit to the euro. The dollar, meanwhile, has been weighed down somewhat by a run of U.S. data that has fed the "risk of recession" narrative. EUR-USD is on track to make its first run of three consecutive up weeks since the late June to early July period, needing a close today above 1.1038 to achieve this.

    [USD, JPY]
    USD-JPY has settled above yesterday's two-day low at 108.45. USD-JPY has been trending upwards since the August-25 low at 104.45, which is a 35-month nadir. The prevailing up-phase marks a correction in the bear trend that has been unfolding from the October-28 high at 114.55. The case of the AUD-JPY cross is of interest, being about to make this the sixth week of ascent out of the last eight weeks, highlighting the improved mood music coming from the U.S. and China on trade. Although the trumpeted 'Phase 1' deal has yet to be finalized, there is relief that the two sides seem committed, after 13 rounds of talks, to making a partial trade, although this will leave the issues about intellectual property and state subsidies unresolved. Although China's CSI equity index, which the Aussie correlates with (China being Australia's dominant export client), closed with a 1.4% loss today, the index is still showing a 6.8% gain from the lows seen in early August. Over this period, AUD-USD has gained by about 2.5%, while AUD-JPY is up by 6.2% from the major-trend low it saw in late August, despite the RBA having cut is cash interest rate to a record low 0.75% during this time.

    [GBP, USD]
    The pound pared gains seen in the immediate wake of the news that the UK and EU had reached a deal on Brexit. The major uncertainty now is whether the deal will pass in the UK's Parliament, which will vote on it at a special session on Saturday. If it passes, then UK will be on track to exit on time, at the end of the October, though a technical delay could still be possible. The deal also sets out a transitory phase through to the end of 2020. If Parliament or, conceivably, any of the EU17 states rejects the deal, then a delay through to at least January 31 next year will be on. Cable belted to a fresh five-month high at 1.2990 before turning lower, back to upper 1.2800s. The pair still was still up by nearly 0.5% on the day, as of the early London PM session, and remains up by nearly 7% from the major-trend low seen in early September. The pound is also up against the yen and most other currencies.

    [USD, CHF]
    EUR-CHF has been lifted by the Brexit deal, which has been supportive of the euro. The cross printed a two-and-a-half-month high at 1.1059 yesterday before pulling back under 1.1000.

    [USD, CAD]
    USD-CAD has found a footing after yesterday posting a two-and-a-half-month low at 1.3131. Increasing signs of U.S. turbulence in the U.S. economy, including a miss retail sales, which is ominous in so far as it shows the slowing in manufacturing and business investment is spreading to the all-important consumer sector, has been taking a toll on the U.S. dollar. USD-CAD has been amid a sideways chop since mid January, ranging from 1.3016 on the downside to 1.3565 on the upside. More of the same looks likely.

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