Home > XE Currency Blog > XE Market Analysis: North America - Sep 09, 2019

AD

XE Currency Blog

Topics6663 Posts6708
By XE Market Analysis September 9, 2019 7:03 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4592
    XE Market Analysis: North America - Sep 09, 2019

    The Pound and the Australian Dollar outperformed while the Yen and Swiss Franc underperformed, with the U.S. currency fluctuating in between. Sterling has rallied on unexpected UK data perkiness, along with today being the day that the bill that will stop a no-deal Brexit happening on October becomes law. Her Majesty's currency has vaulted by over 0.5% against the Dollar, and less so versus the Euro, and more so in the cases against the Yen and Franc, currencies which are seeing more of their safe haven premium unwind. Cable printed a six-week high at 1.2362. UK July GDP and production data came in a above expectations, with growth rising 0.3% m/m, above the median forecast for 0.1%, and with industrial output unexpectedly expanding by 0.1% m/m versus the median for a 0.1% m/m contraction. The Australian Dollar edged out fresh highs, posting six-week peak against both the U.S. Dollar and the Yen, amid a backdrop of rising stock markets in Asia. This came despite weak export data out of China, which followed Friday's underwhelming U.S. jobs data, with markets preferring to focus on the expectation for more stimulus rather than the fear of slowing global growth. AUD-USD 's high is at 0.6872. EUR-USD, meanwhile, settled around the 1.1025-35 mark after rising for three consecutive days last week, which left an 11-day high at 1.1184. Markets will look to a U.S. retail sales and inflation data this week to fine-tine Fed policy expectations. The ECB is also in the spotlight, being expected to hit the stimulus button on Thursday.

    [EUR, USD]
    EUR-USD has has settled around the 1.1025-35 mark after rising for three consecutive days last week, which left an 11-day high at 1.1184. The August U.S. jobs report generated some chop, although the combination of a softer than anticipated job gain but otherwise strong report left markets without a strong sense of direction. Fed Chair Powell left the door open to a 25 bp easing at the mid-September FOMC, but refrained from sounding too dovish, saying that the Fed will "act as appropriate" to sustain the now record-long expansion. Powell also said outlook is a "favorable" one, with the economy "in a good place" and is continuing to perform well with no recession in the forecast. This should keep the Dollar in demand on dips for now. The focus will fall on this Thursday's ECB meeting, which comes with updated staff projections and is widely expected to see the ECB introduce further easing measures. The event risk is that the package of measures will fall short of what markets have been pricing in, because without regulatory changes there is limited room for government bond purchases to be extended significantly. There could be a foray into other asset classes on the QE front but the overall amount is likely to be relatively small for now. We are expecting a small 10 bp cut in the deposit rate to -0.50%, with a tiered system to limit the impact of negative rates. As for EUR-USD, overall we retain a mid-to-low-conviction bearish vie. Support comes in at 1.0998-1.1000.

    [USD, JPY]
    The Yen has opened the new week on a steady-to-softer footing. AUD-JPY managed to eke out a fresh six-week high amid a backdrop of rising stock markets in Asia. This came despite weak export data out of China, which followed Friday's underwhelming U.S. jobs headline, with markets preferring to focus on the expectation for more stimulus rather than the fear of slowing global growth (and with the meat of the jobs report pretty solid, for the most part). For now, given the apparent thawing in U.S.-China relations (new face-to-face discussions have been scheduled for early October), we expect USD-JPY to remain directionally biased to the upside. Support comes in at 106.46.

    [GBP, USD]
    Sterling has rallied on unexpected UK data perkiness, along with today being the day that the bill that will stop a no-deal Brexit happening on October becomes law. Her Majesty's currency has vaulted by over 0.5% against the dollar, and less so versus the euro and more so in the cases against the yen and Swiss franc, currencies which are seeing more of their safe haven premium unwind. Cable printed a six-week high at 1.2362. UK July GDP and production data came in a above expectations, with growth rising 0.3% m/m, above the median forecast for 0.1%, and with industrial output unexpectedly expanding by 0.1% m/m versus the median for a 0.1% m/m contraction. The biggest monthly rise in service-sector growth lifted the overall GDP figure. In the three months to July, GDP was 0.0% while production was -0.5%, better reflecting the headwinds of Brexit uncertainty and slowing global growth. The outlook is still a mildly recessionary one for the UK economy.

    [USD, CHF]
    EUR-CHF has remained buoyant after printing a one-month high on Friday at 1.0931, which extended the rebound from the 26-month low seen on Tuesday at 1.0811. The pickup in risk appetite in global markets, and reduced risk for a no-deal Brexit, has taken the pressure off the ECB as it heads into next Thursday's government council meeting. This has helped float the Euro and at the same time fostering an unwinding in the Franc's safe haven premium (such as it is given the punishing -0.75% deposit rate in Switzerland).

    [USD, CAD]
    USD-CAD has remained heavy after printing a six-week low on Friday following the dual U.S. and Canadian jobs reports, with unexpected strength in the latter generating demand for the Canadian currency. The recouperation in risk appetite in global markets over the last week, with the U.S. and China headed back to the negotiating table, has been a positive for the Canadian Dollar, too, and other commodity currencies. Oil prices are up over 4% from week-ago levels (WTI futures). Resistance comes in at 1.3270-73.

    Paste link in email or IM