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By XE Market Analysis September 30, 2019 7:36 am
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    XE Market Analysis: North America - Sep 30, 2019

    The dollar majors have mostly held comfortably within their respective ranges so far today. EUR-USD dipped to the 1.0919, which is about 20 pips down on Friday's closing levels though lacking the impetus for a move on the 28-month at 1.0904. USD-JPY dipped to a low of 107.75 before recouping to near net unchanged levels around 107.95. AUD-USD breached its Friday low in making a nadir at 0.6745, drawing in the four-week low seen last Wednesday at 0.6739. USD-CAD dipped to a low 1.3224 low before returning toward 1.3250, which is a level that the pair has been gravitating around for over a week now. The concurrent bout of Australian dollar weakness and Canadian dollar firmness saw the AUD-CAD carve out a four-week low. The NZ dollar came under pressure following data showing a sharp deterioration in business confidence. NZD-USD came within a pip of the four-year low seen on September 20 at 0.6255. Sterling traded firmer, reversing some of the losses seen last week. Cable printed a high at 1.2330, which is over 50 pips up on Friday's lows. Opposition parties, led by Scotland's SNP, are looking to stage a confidence motion as soon as this week to take down Boris Johnson's government, concerned that he might on a technicality disregard the new law aimed at preventing a no-deal Brexit on October 31 in the event that a deal has been achieved.

    [EUR, USD]
    EUR-USD dipped to the 1.0919, though remained comfortably within its Friday range. The pair last week posted a fresh 28-month low, affirming a bear trend that's been in play since early 2018. More of the same looks likely. The U.S. economy and Wall Street continues to hold up relatively well -- although showing signs of softening and although a confluence of issues of potentially economy-distrupting proportions (trade warring, Iran and oil prices, presidential impeachment, Brexit) hang over the horizon like a dark cloud -- while data out of the Eurozone last week fanned fears of recession. The September Eurozone ESI economic confidence slumped to 101.7 from 103.1 in the previous month, much weaker than expected headline and the lowest number since February 2015, while preliminary September Eurozone PMI readings showed a marked contraction in manufacturing activity, with service sector activity also slowing sharply, leaving the composite at just 50.4, barely above the 50 point no change mark. The U.S. data calendar this week will be important to with several key economic reports on the calendar that could sway the FOMC's decision on October 30. As always, the nonfarm payroll report (Friday) will a major for the economic outlook and will help guide the FOMC's decision on October 30. There's also manufacturing and non-manufacturing PMIs. The markets and the Fed will be very wary of cracks developing in the labor market and manufacturing. The Eurozone data calendar this week is highlighted inflation data. Overall September Eurozone CPI is expected at a benign 1.0% y/y. There are lots of ECB policymakers due to speak this week, which should a deliver a strong net dovish message.

    [USD, JPY]
    USD-JPY dipped to a low of 107.75 after closing in New York on Friday near 107.95, and AUD-JPY breached below its Friday lows. NZD-JPY also hit a one-week low following weak business confidence data out of New Zealand. The yen's outperformance, although moderate, reflects a restive sentiment in global markets. The U.S. may be considering restricting China's access to U.S. financial markets, while the Brexit situation is coming to a head. The directional risks look to be greater to the downside for USD-JPY given the risks being faced by the global economy from trade warring, Iran, presidential impeachment in the U.S, and Brexit.

    [GBP, USD]
    Sterling traded firmer, reversing some of the losses seen last week. Cable printed a high at 1.2330, which is over 50 pips up on Friday's lows. EUR-GBP concurrently descended, and GBP concurrently ascended. Brexit remains front and centre. Opposition parties, led by Scotland's SNP, are looking to stage a confidence motion as soon as this week to take down Boris Johnson's government, concerned that he might on a technicality disregard the new law (the Benn bill) preventing a no-deal Brexit on October 31 in the event that a deal has been achieved. This hasn't until now been looking a viable option given that the opposition have been divided about who would lead an interim government, with leader of the opposition, Labour's Corbyn, unpopular. In the event this happens, a delay in Brexit to January 31 would be all but assured, with a general election likely in late November.

    [USD, CHF]
    EUR-CHF has found a toehold after about a week-long spell of underperformance, which culminated in a three-week high being printed last Wednesday at 1.0832. The declines followed the SNB's quarterly policy announcement last week, which will be frustrating to Swiss policymakers given their chronic concerns of the franc's chronic state of overvalue-ment (which regularly tops the Economist magazine's Big Mac purchasing parity comparison of currencies). The 26-month seen in early September at 1.0811 has so far remained untroubled, but still looks vulnerable.

    [USD, CAD]
    USD-CAD has edged lower over the last couple of trading days, pushing below 1.3250, which was a level that the pair had been orbiting for a week and more. Oil prices have steadied after more than giving back the sharp gains seen in the immediate wake of the attack on Saudi crude facilities, which has perhaps reduced pressure on the Canadian dollar. Some key data loom on both the U.S. and Canadian calendars this week. The U.S. schedule culminates in the release of the September jobs report on Friday. The risks relative to expectations are clearly to the downside regarding upcoming U.S. economic reports, which generating downside bias in USD-CAD. As for Canadian data, July GDP (Tuesday) is expected to reveal a 0.1% gain (m/m, sa) after the 0.2% rise in June, consistent with slowing in Q3 GDP from the 3.7% clip revealed in the separate real Q2 measure. Canada's trade balance (Friday) is expected to show a narrowing in the deficit to -C$1.0 bln in August from -C$1.1 bln in July. The August industrial product price index is up today, though isn't often a market mover. Overall, assuming oil prices remain capped, and assuming incoming U.S. versus Canadian data maintains a slight dovish gap in Fed versus BoC outlooks, USD-CAD's looks likely to retain a moderate downward track.

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