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By XE Market Analysis September 13, 2019 7:39 am
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    XE Market Analysis: North America - Sep 13, 2019

    A 1%-plus rally in the Pound has been the main dynamic among the main currencies, which spirited Cable to a seven-week peak at 1.2476, extending the rebound from last week's major-trend low at 1.1958. There was no particular catalyst. While EU Trade Commissioner Hogan said that events in the UK's Parliament have improved the odds for an extension in the Brexit deadline, this didn't tell us anything we didn't already know, while Sterling had been driving higher well before his remarks hit the wires. The UK currency's ascent is more a case of market participants taking stock of the sharp descaling in the risk for a no-deal Brexit, which has now been outlawed on October 31. No-deal still can't be ruled out, though not before the Brexit deadline is pushed out to the end of January, which at the moment is looking a strong probability. Elsewhere, EUR-USD lifted on Cable's coattails, rising into 17-day high terrain above 1.1100. The ECB's promise of open-ended asset purchase, which initially drove the Euro to a 1.0926 low, hasn't evidently been sufficient to sustain declines with the Fed on track to cut rates a second time next Wednesday, even though aggressive action isn't likely considering the strength in the U.S. economy. The Yen posted fresh trend lows against the dollar, though remained just off the lows it saw against the Euro, Australian Dollar and other currencies yesterday. USD-JPY printed a six-week high at 108.26 in what is now the fourth consecutive day of higher-high making. The Japanese currency has been underperforming maid a persisting phase of risk-on conditions in global markets.

    [EUR, USD]
    EUR-USD has lifted to 17-day highs above 1.1100, tracking strong gains in Cable during the London morning session. The pair is now up by nearly 1% from week-ago levels, but is down by 0.4% from month-ago levels and is off by over 3% on the year-to-date. The ECB's promise of open-ended asset purchase, which initially drove the Euro to a 1.0926 low, wasn't sufficient, evidently, to sustain declines with the Fed on track to cut rates a second time next Wednesday, even though aggressive action isn't likely considering the strength in the U.S. economy.

    [USD, JPY]
    The Yen posted fresh trend lows against the Dollar, though remained just off the lows it saw against the Euro, Australian Dollar and other currencies yesterday. USD-JPY printed a six-week high at 108.26 in what is now the fourth consecutive day of higher-high making. The Japanese currency has been deflating maid a persisting phase of risk-on conditions in global markets. The ECB's policy bazooka, particularly the promise of open-ended asset purchases, has been the latest fodder for bulls on world stock markets, which comes amid a cooling in U.S.-China trade tensions. Expectations for stimulus of the fiscal kind in Europe and China are also in the mix, offsetting a recent descaling in expectations for stimulus of the monetary kind by the Fed and ECB. The mood music could change quickly. On the U.S.-China trade front, we have, of course, many times heard upbeat rhetoric in the many previous rounds of the so-far fruitless trade discussions. For now, however, the Yen looks likely to remain on a downwardly biased track.

    [GBP, USD]
    The Pound is up strongly, showing a near 1% gain on the day versus both the dollar and yen, and up 0.6% in the case against the euro. Cable has printed a seven-week peak at 1.2455, extending the rebound from last week's major-trend low at 1.1958. The reason? Markets taking stock of the sharp descaling in the risk for a no-deal Brexit, which has now been outlawed on October 31. No-deal still can't be ruled out, though not before the Brexit deadline is pushed out to the end of January, which at the moment is looking a strong probability, and only in the event the Conservative Party wins the upcoming election (likely in late November or early December), especially if the Brexit Party performed strongly and the two form a coalition government. The pro-EU parties, which are strategising electoral pacts and alliances, look likely to be a force to be reckoned with, too.

    [USD, CHF]
    EUR-CHF has remained buoyant after printing a six-week high on Tuesday at 1.0968, 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 fostered 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 printed a on-week high at 1.3325, extending the rebound from the six-week low on Tuesday, at 1.3134. A sharp drop in oil pries this week, catalysed by the departure of hawkish-on-Iran U.S. national security advisor, John Bolton, has weighed on the Canadian currency relative to its U.S. counterpart. USD-CAD has resistance at 1.3234-35.

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