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By XE Market Analysis September 22, 2017 7:48 am
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    XE Market Analysis: North America - Sep 22, 2017

    USD-JPY dove under 112.00 in Tokyo trading after North Korea threatened to detonate an H-bomb in the Pacific. The pair left a low at 111.65 before settling and recouping the 112.00 level during the London AM session. The dollar posted declines against other currencies. EUR-USD rallied to a peak of 1.2004 following much stronger than expected flash September PMI survey readings out of Germany and France. The pair subsequently ebbed back to around 1.1970 but remain some 25 pips up on the day. In contrast, the dollar managed to gain some ground against the pound, which came under pressure ahead of a keynote Brexit speech due to be delivered by Prime Minister May later today in Florence. The latest CBI industrial trends survey out of the UK also disappointed.

    [EUR, USD]
    EUR-USD rallied to a peak of 1.2004 following much stronger than expected flash September PMI survey readings out of Germany and France. The pair subsequently ebbed back to around 1.1970 but remain some 25 pips up on the day. Forays above 1.2000 since late August have consistently flagged and reversed, and there once again seems to be some wariness among interbank spot traders and short-term speculative accounts in running longs above 1.2000. While today's data has fortified the view for the ECB to commit to QE tapering, the freshly re-invigorated hawkish Fed bias may be curtailing EUR-USD's upside potential.

    [USD, JPY]
    USD-JPY dove under 112.00 in Tokyo trading after North Korea threatened to detonate an H-bomb in the Pacific. The pair left a low at 111.65 before settling and recouping the 112.00 level during the London AM session. North Korea's advance to becoming a nuclear power will remain wildcard risk for global market, with the Japanese currency typically rallying amid any heightening in geopolitical tensions.

    [GBP, USD]
    Sterling traded softer into PM May's speech in Florence, which is due to be delivered from 13:15 GMT. The pound is presently showing an average 0.3% decline versus the G3 currencies, given back gains posted yesterday. Cable has pulled back to around 1.3550-60 after posting an intraday high at 1.3596. A Cabinet source cited by the BBC yesterday suggested that May is looking to break the deadlock in Brexit negotiations, offering a deal on the divorcing terms. The course also said that the government is seeking a two-year transition period beyond Brexit in March 2019, which is something that would go down well in sterling markets. We'll have to see if she delivers. Brexit negotiations were suspected for a week at the request of the British government, needing time to regroup, and will commence for the fourth round of talks on Monday. For markets, progress on agreeing divorce terms, signs that negotiations on a new trade deal are on the horizon, and a post-Brexit transition period would be the ideal combo.

    [USD, CHF]
    EUR-CHF has remained buoyant after clocking a new 32-month high at 1.1605 on Thursday. A an ebb in geopolitical tensions along with last week's SNB 's post-policy meeting guidance, where the central bank stated that the currency "remains highly valued," even in light of the relatively sharp weakening the currency saw from late July. We look for EUR-CHF to make an eventual return to the SNB's former floor level, at 1.2000.

    [USD, CAD]
    USD-CAD fell to a two-session low of 1.2261 as the U.S. dollar came under broader pressure. The move puts some space in from Wednesday's 1.2391 high, which was seen following the Fed's hawkish guidance. We still expect the pair to find demand on dips with the Fed's statement this week having readdressed the imbalance between the respective Fed and BoC outlooks. This comes amid signs that the four-month bear phase in USD-CAD, during which time the U.S. buck lost 12% to the Canadian dollar, was starting to wane. Last week was the first up week in last five weeks, while momentum indicators were showing that the bear trend had been starting to look overstretched. The early-September high at 1.2415 provides an initial target ahead of 1.2500. Canadian August CPI is up today, which we see at 1.6% after 1.2% in July. Retail sales are also due, expected to grow 0.3% in July.

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