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By XE Market Analysis October 31, 2017 7:59 am
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    XE Market Analysis: North America - Oct 31, 2017

    The dollar has traded mixed so far today, losing moderate ground to the euro and sterling, among other currencies, while lifting out of a two-day low in the case against the yen. In the U.S., political intrigue along with the announcement, promised to be made tomorrow, of the new Fed chair, will remain focal points for markets. The euro has been trading mixed, coming under pressure versus the dollar and euro, but rallying notably versus the Swiss franc, and making advances against the Australian dollar, among others. A batch of Eurozone data releases were mixed, with inflation sub forecasts, growth meeting expectations and unemployment figures better than anticipated. EUR-USD has ebbed back under 1.1630 after earlier failing to sustain gains above 1.1650. The pair remains about 50 pips up on the lows seen in early trade yesterday, with some of the Catalonian risk discount having since unwound some. The yen backed out of highs seen during Tokyo trading after dovish guidance from the BoJ governor during his post-meeting press conference. USD-JPY lifted to around 113.30 after clocking a 12-day low at 112.95.

    [EUR, USD]
    The euro has been trading mixed, coming under pressure versus the dollar and euro, but rallying notably versus the Swiss franc, and making advances against the Australian dollar, among others. A batch of Eurozone data releases were mixed, with inflation sub forecasts, growth meeting expectations and unemployment figures better than anticipated. EUR-USD has ebbed back under 1.1630 after earlier failing to sustain gains above 1.1650. The pair remains about 50 pips up on the lows seen in early trade yesterday, with some of the Catalonian risk discount having since unwound some. EUR-GBP has ebbed back under 0.8800, and has by our data come within 1 pip of yesterday's one-month low at 0.8793. EUR-CHF, in contrast, had shot to a two-day high at 1.1621, with the Swiss franc concomitantly weakening as Catalonia risk continues to be priced out.

    [USD, JPY]
    The yen backed out of highs seen during Tokyo trading after dovish guidance from the BoJ governor during his post-meeting press conference. USD-JPY lifted to around 113.30 after clocking a 12-day low at 112.95. The BoJ did the expected, and left policy on hold at its meeting today. New board member Kataoka voted for additional easing, while Governor Kuroda espoused dovish guidance in his press conference, warning that "abnormal" yen appreciation would hurt the economy and accelerate deflation, and that the central bank will continue with "powerful" accommodative monetary policy. Fundamentally we remain bearish of the yen, particularly during risk-on phases in global markets (which would tend to reduce the Japanese currency's safe haven appeal).

    [GBP, USD]
    Cable logged a three-session high at 1.3222, pushing the pair slightly above the midway point of the sideways range that's been seen for almost a month now. EUR-GBP has been a driver of broader sterling gains over the last day, and the cross itself has descended into four-week terrain near 0.8800. The Brexit negotiation process is generating headlines in the UK press almost daily, but are have been having little effect on the forex market, with market participants waiting on concrete developments. Sterling markets are, meanwhile. fully discounting a 25bp rate hike from the BoE this Thursday, which will reverse last August's 'emergency' cut following the Brexit vote, and which is likely to be cloaked in dovish guidance. We still advise selling into Cable gains. Resistance at 1.3261-63.

    [USD, CHF]
    EUR-CHF has settled around 1.1600 after diving sharply last week amid a broader euro selloff following the ECB announcement on Thursday, which drove the lower after logging a 33-month highs just above 1.1700. We have been anticipating an eventual return to 1.2000, which is the former trading floor of the SNB's, though this assumes that political tensions (Catalonia in particular) don't worsen, as the franc tends to find demand on news developments that might be threating to the political integrity of the Eurozone.

    [USD, CAD]
    USD-CAD has been in consolidation mode after last week posting its biggest up week since March, which produced a three-month high at 1.2917. The current up phase was sparked on Friday by an unexpected 0.3% m/m contraction in Canadian August retail sales, while a broader bid in the U.S. dollar as markets factor in a more hawkish Fed chairperson has subsequently been in play. We expect the bias will remain to the upside, with the Fed on track to hike the Fed funds rate by 25 bp in December, and with BoC policymakers having actively dispelled any notion that it is on a committed tightening path in the face of a moderating growth momentum in the economy, benign price pressures and ongoing uncertainty about NAFTA negotiations.

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