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By xemarketanalysis December 21, 2018 10:35 am
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    XE Market Analysis: US Dollar Remains Under Pressure Over the Threat of a Government Shutdown

    OVERVIEW

    •   The Greenback is trying to recover from its lowest levels in four weeks, up 0.28%
    •   Safe-haven Yen strengthen to 15-week high amidst risk of global economic slowdown
    •   A barrel of NYMEX WTI Crude dropped to $45.50, losing a quarter of its value year-to-date.

    HIGHLIGHT

    Investors are unwitting participants on an episode of Fear Factor, Global Currencies. The Japanese Yen has become the currency of choice as the market seeks the refuge of safe-haven currencies. USD/JPY dropped by nearly 2.3% this week and is currently trading near a 15-week low. We expect a slight rebound from here but the primary market concerns: global economic slowdown, falling oil prices and political chaos in London and Washington are expected to remain alive for a bit longer.

    US DOLLAR

    The US Dollar index is bouncing from a four-week low on the back of mixed data released this morning. The Personal Consumption Expenditure index rose by 1.6% whilst Q3 GDP matched market estimates at 3.4% according to BEA. 

    The Greenback has come under intense selling pressure with concerns deepening over inversion in the yield curve and political hullabaloo in Washington. Equity markets remain in negative territory despite reports that China is adopting policies to revive its flagging economy. WTI oil slides again to its lowest level since July 2017, dragging along commodity currencies.

    BRITISH POUND

    The Sterling is clinging to the mid-point of 1.26 and hoping to close in positive territory after six successive weeks of continuous decline. Data out of the UK showed the final GDP was flat at 0.6% between Q2 and Q3. Services sector remains the central pillar of growth but the indicators are pointing to slight easing and business investment remains a cause of concern after recording declines in three consecutive quarters. GBP/USD is still vulnerable to the current deadlock over the elusive Brexit deal.

     

    EURO

    EUR/USD is down 0.35% after failing to climb above the 1.15 level. There were no data out of the euro bloc to help the common currency to above an eight-week high, and the recent soft move can be attributed to profit taking activities ahead of the weekend. We expect the pair to consolidate around current levels with declining liquidity from the market. 

    CANADIAN DOLLAR

    The Canadian Dollar weakened to a fresh 18-month low, once again emulating moves in the oil futures market. Investors are mostly disappointed with mixed economic data releases this morning. Retail sales increased 0.3% in October and excluding motor vehicles sales; the print came at minus 0.4%. The real GDP grew 0.3% in October bouncing off a 0.1% decrease in September. USD/CAD is expected to be driven mainly by developments around WTI as we close the week. 

    AUSTRALIAN DOLLAR

    AUD/USD slipped to a seven-week low below 0.7100 level driven once again by fears of global slowdown. The currency is highly vulnerable to sliding oil prices and economic deterioration in China. A breach below current levels could see the pair testing levels last seen in January 2016.

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