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By XE Market Analysis July 20, 2018 3:24 pm
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    XE Market Analysis Posts: 3693
    XE Market Analysis: Asia - Jul 20, 2018

    The Dollar was fairly steady in the London morning session, but that changed in a hurry following a Trump tweet again talking down rates and the dollar, accusing China and the EU of currency manipulation. The Greenback then tumbled broadly, taking EUR-USD to 1.1738 highs from pre-open levels of 1.1650. USD-JPY fell from near 112.50 to 111.41 lows into the close. USD-CAD pulled back under 1.3120 following solid Canada data. The pound rallied to 1.3140. close.

    [EUR, USD]
    EUR-USD topped at 1.1723 early in the session, printing four-day high in the process. The pairing had shot higher on Trumps's Tweet "China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollar gets stronger and stronger with each passing day - taking away our big competitive edge. As usual, not a level playing field." The Euro has since steadied over 1.1700.

    [USD, JPY]
    USD-JPY has stayed down following Trump's Tweet storm early in the session, as he attempted to talk down interest rates and the dollar. In addition, Trump talked of turning up the China trade tariff dial to the tune of $500 bln in goods. USD-JPY fell from near 112.45 into the open, to a better than one-week low of 111.57. The pairing since has managed only a bounce to 111.91.

    [GBP, USD]
    The Pound managed to find a footing following a three straight day run lower. Cable was the biggest mover, reflecting concurrent weakness in the Dollar, with the pair posting a three-day high of 1.3140 to put some further distance in from yesterday's 10-month low at 1.2957. Cable still remains down by 1.1% on the week-on-week comparison. BoE MPC member Tenreyro said earlier that recent economic data have shown that economic weakness in Q1 was just a weather-related soft patch, though she refused to give away any more than that with regard to how she might vote at the upcoming August MPC meeting, noting that she will be watching incoming data closely.

    [USD, CHF]
    EUR-CHF has settled back in the mid 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The comments affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

    [USD, CAD]
    USD-CAD tumbled to 1.3127 lows from 1.3215 following the warmer Canada CPI and strong retail sales outcomes. September crude futures largely remained over the $68 level, also pressuring the pairing to a degree. Tuesday's 1.3108 low is the next support level.

    XE Currency Blog

    Topics5499 Posts5544
    By xemarketanalysis July 20, 2018 11:30 am
      xemarketanalysis's picture
      xemarketanalysis Posts: 486
      XE Market Analysis: Thou Shalt Not Stir the Pot Again, Mr. President

      OVERVIEW

      • US Dollar Index shot down by comments and putting at risk Fed’s independence.
      • Currency war brewing with Chinese Yuan falling to its lowest level in more than a year.
      • WTI is trading a touch below $70 a barrel, up 55 cents on the day.

      HIGHLIGHT

      Whilst the overnight selloff of the Greenback has captured the headlines, the Indian Rupee fell to a fresh record low against the USD. The INR has been hurt by strong oil prices and local politics. The PM survived a no-confidence motion but the currency remains the worst performer among Asian peers. With a risk of currency war looming, we expect the INR to track the Chinese redback. 

      US DOLLAR

      The Greenback is giving away its previous gains as we look to close the week. The Dollar Index is down 0.2% against its peers, shot down by comments from the president of the White House. Markets showed panic reaction, fearing the independence of the Fed was at risk. Trumponomics believes in and prefers a weaker Dollar with low rates to stimulate the economy. There is also a fear that the currency war is going to dictate the direction and pace of the markets. In the Far East, the Chinese Yuan fell to its lowest level in more than a year. There is no data release from the US today. We expect a lull to hit the market as we move into the day unless we see a barrage of tweets from Washington. 

      BRITISH POUND

      Headlines are dictating the direction of the GBP/USD pair. The Sterling rose from the mid-1.29 levels, the lowest levels of 2018, after comments from US President sent the Dollar lower. PM May tried to reassure the markets over Irish border.  We expect the recent gains to be a temporary relief. PM May’s position remains unstable amidst Brexit’s uncertainty. 

      EURO

      EUR/USD is following general market sentiment and is up 0.6% on the day. We had some second-tier numbers out of Europe as German producer prices rose 0.3%. The number matched expectations. The market seems to react more overnight to Trump’s comments sending the Euro to a 3-day high.

      CANADIAN DOLLAR

      The Canadian Dollar is strong this morning after better than expected data releases. Canadians are on a shopping spree this summer. Sales rose by 2%, 8 out of 11 subsectors reporting growth. CPI rose 2.5% on a year-over-year basis in June. This is the largest reading since February 2012 as per Stats Canada. It seems the economy is back on track after recent improved data and solid labour market. USD/CAD is currently down 0.9%.

      AUSTRALIAN DOLLAR

      The Aussie is one of the star commodity currency performers this morning. AUD is bouncing off a near three weeks low, following a massive US Dollar selloff. We expect the currency to pause here as the market tries to make sense of the overnight decline of the Chinese Yuan.  The PBOC reduced its Yuan fixing by 0.9% after stating that it would keep the currency stable. The move could be spilt over and pressure other Asian currencies.

      FEATURED CURRENCY

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      Topics5499 Posts5544
      By XE Market Analysis July 20, 2018 7:24 am
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        XE Market Analysis Posts: 3693
        XE Market Analysis: North America - Jul 20, 2018

        The Dollar reached the early European PM session at near net unchanged levels, consolidation the declines that were seen in the wake of President Trump voicing his displeasure at the prospect of higher interest rates. Trump's verbal intervention, if that's what it was, has thrown a spanner in the works of many Dollar-bullish prognostications. EUR-USD settled to an oscillation of 1.1650 after capping out at 1.1678, which is a two-day high. USD-JPY found its feet after stocks rebounded in China and Asia, which was seen after the Yuan lifted from lows amid reported purchases by major state banks, apparently in a Beijing-directed move to smooth USD-CNY's assent after the PBoC set a higher reference rate for a seventh consecutive day. The Yen had been firming after the Yuan hit one-year lows, which had rattled stock markets in Asia. The sharp drop in global equity markets seen after China's sudden 2% devaluation of the Yuan in August 2015 has been at the forefront of investors minds lately, so the apparent intervention to cap Yuan losses mollified, at least up to a point, prevailing concerns about competitive devaluation and ratcheting-up trade tensions with the U.S. This fuelled a rebound in the MSCI Asia-Pacific equity index (ex-Japan) to a net gain of 0.55% from a 0.4% loss at the intraday lows. USD-JPY concomitantly recouped to the mid 112.0s after printing a low of 112.21 while AUD-JPY, a relatively high-beta cross which is sensitive to China sentiment, has lifted by nearly 1% from its lows.

        [EUR, USD]
        EUR-USD settled to an oscillation of 1.1650 after capping out at 1.1678 in the wake of President Trump voicing his displeasure at the prospect of higher interest rates. Trump's remarks were from a preview of an interview with CNBC, which will be played in its entirety later today. The President's verbal intervention, if that's what it was, has thrown a spanner in the works of our bearish EUR-USD view, which was rooted on the prognosis for strong U.S. economic growth and the Fed's tightening course. We still see the balance of direction risks as being skewed to the downside for EUR-USD. The still-evolving populist political landscape in Italy still carries potential to disrupt the functioning of the EU. EUR-USD has support at 1.1626-30.

        [USD, JPY]
        USD-JPY found its feet after stocks rebounded in China and Asia, which was seen after the Yuan lifted from lows amid reported purchases by major state banks, apparently in a Beijing-directed move to smooth USD-CNY's assent after the PBoC set a higher reference rate for a seventh consecutive day. The Yen had been firming after the Yuan hit one-year lows, which had rattled stock markets in Asia. The sharp drop in global equity markets seen after China's sudden 2% devaluation of the Yuan in August 2015 has been at the forefront of investors minds lately, so the apparent intervention to cap Yuan losses mollified, at least up to a point, prevailing concerns about competitive devaluation and ratcheting-up trade tensions with the U.S. (and risks for capital outflows from China). This fuelled a rebound in the MSCI Asia-Pacific equity index (ex-Japan) to a net gain of 0.55% from a 0.4% loss at the intraday lows. USD-JPY concomitantly recouped to the mid 112.0s after printing a low of 112.21 while AUD-JPY, a relatively high-beta cross which is sensitive to China sentiment, has lifted by nearly 1% from its lows.

        [GBP, USD]
        Sterling has underperformed this week, showing an average 1.7% decline on the week-on-week comparison versus the G3 currencies. Wednesday's unexpected dip in core UK CPI (to 1.9% y/y from 2.1% y/y) along with yesterday's unexpected contraction in June retail sales (of 0.5% m/m) have been ostensibly blamed for dimming BoE tightening expectations, though there are arguments that hawks at the MPC could use to downplay both -- summer discounting being behind an aberrative ebb in inflation, and, in the case of retail sales, hot weather and the national fixation on the World Cup being behind one-off declines in footfall on the high street and online activity. A more pressing concern is the sharpening Brexit negotiation process, as time starts to run out. An EU source cited by Bloomberg yesterday said that the UK government's policy document, which lays out what it wants from a new relationship with the EU, is unclear. EU ministers are meeting in Brussels today to formally review the UK government's proposals. The European Commission said yesterday that "everyone must now step up plans for all scenarios" ahead of March 29th next year, especially in the event of a no-deal exit. We continue to see directional risks to Cable as being greater to the downside than to the upside. Cable has resistance at 1.3042-45.

        [USD, CHF]
        EUR-CHF has settled back in the mid 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The commáents affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

        [USD, CAD]
        USD-CAD has settled higher, around 1.3250. Fed chair Powell's upbeat view of the U.S. economy, along with recent hefty declines in oil prices, formed a cocktail of bullish narratives for USD-CAD this week. We retain a bullish view of the pairing, looking for a revisit of the June highs at 1.3384-87. Support comes in at 1.3146-68. The Canadian calendar picks up today with the release of retail sales and CPI data. We expect retail sales to snap back by 1.0% in May after the 1.2% loss in April that was blamed on poor weather during the month (ice storm!). We anticipated CPI to slip 0.1% in June (m/m, nsa) after the surprisingly slim 0.1% gain in May, as falling gasoline prices impact in June. The annual growth rate is seen at 2.2% (y/y, nsa), matching the 2.2% y/y clip in May. The three core CPI measures are expected to maintain 1.9% annual rate of expansion in June.

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        By XE Market Analysis July 20, 2018 2:54 am
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          XE Market Analysis: Europe - Jul 20, 2018

          The Dollar has been trading with a softer bias after President Trump said yesterday that he was "not thrilled" with higher interest rates while venting at the weaker Yuan, even though the remarks that were subsequently walked back some by a White House official. Trump's remarks were from a preview of an interview with CNBC, which will be played in its entirety later today. EUR-USD posted a 1.1678 high in the wake of Trump's remarks and has subsequently met good demand on dips. USD-JPY has consolidated below 112.50, above the Trump-inspired low at 112.05. There has also been a rekindling in the Yen's safe haven premium, reflected by declines in EUR-JPY, AUD-JPY and other Yen crosses. AUD-JPY printed a nine-day low of 82.21, for instance. Stock markets have been mixed in Asia, and S&P 500 futures have modestly extended yesterday's regular-session decline. The PBoC devalued the Yuan by the most for a single day since June 2016, with USD-CNY's reference rate set at 6.7671, up from yesterday's 6.7066 and the highest in a year. This points to a deepening in the Sino-U.S. trade war. In data, Japan's June core CPI lifted to a rate of 0.8% y/y, up from 0.7% y/y in May, as expected and still far short of the central bank's 2% target. The data chimes with a recent report saying that the BoJ will likely cut its long-term inflation projections.

          [EUR, USD]
          EUR-USD posted a 1.1678 high in the wake of Trump's remarks and has subsequently met good demand on dips. The buoyancy in the pairing has reflected Dollar weakness after President Trump said yesterday that he was "not thrilled" with higher interest rates. Trump's remarks were from a preview of an interview with CNBC, which will be played in its entirety later today. The President's verbal intervention in forex has thrown a spanner in the works of our bearish EUR-USD view, which was rooted on the prognosis for strong U.S. economic growth and the Fed's tightening course. EUR-USD has support at 1.1626-30.

          [USD, JPY]
          USD-JPY has consolidated losses seen after President Trump said yesterday that he was "not thrilled" with higher interest rates, remarks that were subsequently walked back some by a White House official. There has also been a rekindling in the Yen's safe haven premium, reflected by declines in EUR-JPY, AUD-JPY and other Yen crosses. AUD-JPY printed a nine-day low of 82.21, for instance. Stock markets have been mixed in Asia, and S&P 500 futures have modestly extended yesterday's regular-session decline. The PBoC devalued the Yuan by the most for a single day since June 2016, with USD-CNY's reference rate set at 6.7671, up from yesterday's 6.7066 and the highest in a year. This points to a deepening in the Sino-U.S. trade war. In data, Japan's June core CPI lifted to a rate of 0.8% y/y, up from 0.7% y/y in May, as expected and still far short of the central bank's 2% target. The data chimes with a recent report saying that the BoJ will likely cut its long-term inflation projections (according to unnamed sources cited by Reuters). The central bank meets on policy on July 30-31, when a quarterly revision of inflation and growth forecasts will also be published. While fundamentals for USD-JPY are bullish (on the contrasting courses of Fed and BoJ policy), the pair may trade lower should a risk-off sentiment take hold. USD-JPY has resistance at 113.38-40.

          [GBP, USD]
          Sterling has underperformed this week. Wednesday's unexpected dip in core UK CPI (to 1.9% y/y from 2.1% y/y) along with yesterday's unexpected contraction in June retail sales (of 0.5% m/m) have been ostensibly blamed for dimming BoE tightening expectations, though there are arguments that hawks at the MPC could use to downplay both -- summer discounting being behind an aberrative ebb in inflation, and, in the case of retail sales, hot weather and the national fixation on the World Cup being behind one-off declines in footfall on the high street and online activity. A more pressing concern is the sharpening Brexit negotiation process, as time starts to run out, with an EU source cited by Bloomberg saying that the UK government's policy document, which lays out what it wants from a new relationship with the EU, is unclear. EU ministers will meet in Brussels today to formally review the UK government's proposals. The European Commission said today that "everyone must now step up plans for all scenarios" ahead of March 29th next year, especially in the event of a no-deal exit. We continue to see directional risks to Cable as being greater to the downside than to the upside. Cable has resistance at 1.3042-45.

          [USD, CHF]
          EUR-CHF has settled back in the mid 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The commáents affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

          [USD, CAD]
          USD-CAD has settled higher, around 1.3250. Fed chair Powell's upbeat view of the U.S. economy, along with recent hefty declines in oil prices, formed a cocktail of bullish narratives for USD-CAD this week. We retain a bullish view of the pairing, looking for a revisit of the June highs at 1.3384-87. Support comes in at 1.3146-68. The Canadian calendar picks up today with the release of retail sales and CPI data. We expect retail sales to snap back by 1.0% in May after the 1.2% loss in April that was blamed on poor weather during the month (ice storm!). We anticipated CPI to slip 0.1% in June (m/m, nsa) after the surprisingly slim 0.1% gain in May, as falling gasoline prices impact in June. The annual growth rate is seen at 2.2% (y/y, nsa), matching the 2.2% y/y clip in May. The three core CPI measures are expected to maintain 1.9% annual rate of expansion in June.

          XE Currency Blog

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          By XE Market Analysis July 19, 2018 2:53 pm
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            XE Market Analysis Posts: 3693
            XE Market Analysis: Asia - Jul 19, 2018

            After a relatively quiet morning session, the Dollar took a hit on Trump headlines that came from a CNBC preview of an interview with him that will be released in its entirety tomorrow. In it Trump said that while he values the independence of the Fed, he must say that he's not pleased with rates going up every time we make some progress on the economy. He doesn't necessarily agree with raising rates, and is "not thrilled" by higher rates. He also took a direct shot at the weakening yuan and euro, which he said were putting the U.S. at a trade disadvantage. USD-JPY dropped from 112.86 to 112.08 lows and the euro was bid up to 1.1678 from the 1.1600 area. The USD partially recovered some losses into the close.

            [EUR, USD]
            EUR-USD has remained buoyant following Trump's "not thrilled" with higher interest rate comments that were aired from a CNBC interview. The pairing topped at 1.1678, and remains over 1.1670 currently. Of course, the Fed will remain fully independent, and continue on its gradual rate hike path, so the latest move will just give euro bears better levels to sell into.

            [USD, JPY]
            USD-JPY found some traction under 112.10, after falling from 112.85 in the aftermath of Trump voicing his dislike for higher U.S. interest rates. The pairing has since recovered to 112.49 highs, though had been due for a pullback after printing six-month highs of 113.16 earlier. Buy on dips remain in vogue, as Fed and BoJ policies remain divergent, and as U.S. economic growth remains strong.

            [GBP, USD]
            Cable fell to 1.2958 lows in N.Y. trade, levels seen last September. Yesterday's unexpected dip in core UK CPI along with today's unexpected contraction in June retail sales have been ostensibly blamed for dimming BoE tightening expectations. A more pressing concern is the sharpening Brexit negotiation process, as time starts to run out, with an EU source cited by Bloomberg today saying that the UK government's policy document, which lays out what it wants from a new relationship with the EU, is unclear

            [USD, CHF]
            EUR-CHF has settled back in the mid 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The comments affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

            [USD, CAD]
            USD-CAD printed three week highs of 1.3268 after the open, since easing back to 1.3228 lows. The CAD has perked up a bit as oil prices recovered, leaving WTI crude (September contract) near $68.50 after falling to $66.62 trend low early. The pairing later popped to three-week highs of 1.3289 in choppy trade. U.S. dollar strength in general has been supportive of USD-CAD this week.

            XE Currency Blog

            Topics5499 Posts5544
            By xemarketanalysis July 19, 2018 1:41 pm
              xemarketanalysis's picture
              xemarketanalysis Posts: 486
              XE Market Analysis: Chinese Yuan and US Dollar Respond to Tariffs on Chinese Exports

              OVERVIEW

              • USD strengthens across the board.
              • European equities are lower.
              • GBP/USD is at 10-month lows.

              HIGHLIGHT

              China's central bank announced plans to weaken the Yuan as a means of stimulus in response to US tariffs imposed on Chinese exports. USD/CNY made new 1-year highs in response. 

              US DOLLAR

              The US Dollar has been well bid throughout the session, gaining ground against most major trading partners. The Dollar Index made fresh 1-year highs earlier in the day at 95.65.

              BRITISH POUND

              GBP made multi-month lows in both USD and EUR terms this morning, hurt by weaker than expected retail sales data. Despite this, interest rate markets are still pricing a 70% chance of a rate hike at the Bank of England's August meeting.

              EURO

              EUR/USD continues to drift back to the lower end of the recent range. German PPI, as well as Eurozone current account data tomorrow, will deliver the next short-term impetus for pricing. 

              CANADIAN DOLLAR

              Continuing global trade tensions have weighed on commodity prices, and the CAD by association. USD/CAD is currently at 3-week highs.

              AUSTRALIAN DOLLAR

              Aussie was buoyed overnight by strong employment data, before being dragged lower by the selloff in the Chinese Yuan. AUD often trades as a proxy for sentiment around China. 

              FEATURED CURRENCY

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              Topics5499 Posts5544
              By XE Market Analysis July 19, 2018 7:22 am
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                XE Market Analysis Posts: 3693
                XE Market Analysis: North America - Jul 19, 2018

                The Dollar rose for at third consecutive day, tracking a rise in U.S. Treasury yields. The USD index (DXY) lifted by nearly 0.5% in making a fresh three-week high at 95.50. EUR-USD printed a 17-day low at 1.1595, and Cable clocked a 10-month low of 1.2985, aided by weak retail sales data out of the UK (even though there were one-off factors at play). USD-JPY climbed back above 113.00 but remained shy of yesterday's four-month peak at 113.13. The U.S. currency also posted gains against the Dollar bloc units and most emerging market currencies. Expectations for U.S. GDP to more than double Q1's growth rate by rising to a 4.1% y/y clip in Q2 (the advance report of which is due next Friday) have been underpinning, being brought into focus by the upbeat prognosis of Fed Chairman Powell during his testimonies before the Senate and House this week. A concurrent theme has been refreshed concerns about trade protectionism, which has cast a dampener on base metal prices, along with Asian and European stock markets, and U.S. equity index futures. Brexit remains prominent with officials on both sides of the channel proposing stepped up contingency planning for a no-deal Brexit outcome (whereby the UK leaves the EU without establishing new trading and other arrangements).

                [EUR, USD]
                EUR-USD printed a 17-day low at 1.1595, extending declines into a third consecutive day. We remain bearish of the pairing, based on the prognosis for strong U.S. economic growth and the Fed's tightening course, while any move from Trump to follow-through on hits threats to tariff car imports would likely be negative for the Euro relative to the Dollar. EUR-USD has resistance at 1.1660-62 while the July-2 low at 1.1591 provides a downside waypoint.

                [USD, JPY]
                USD-JPY has been making time in the upper 112.00s after yesterday capping out at 113.13, which is the loftiest level the pairing has seen since January. Buoyant global stock markets, where upbeat Q2 corporate earnings, and expectations for more, have offset concerns about trade protectionism for now, which has allowed the Yen's safe haven premium to unwind some and for markets to focus on bullish fundamentals (i.e. contrasting policy paths of the Fed and BoJ). A report from last Friday that the Japanese central bank will likely cut its long-term inflation projections, according to unnamed sources cited by Reuters, has continued to resonate. The sources suggested that the BoJ will concede that CPI will likely remain below the 2% target for as long as three more years, and highlight structural factors that are capping inflation. The central bank meets on policy on July 30-31, when a quarterly revision of inflation and growth forecasts will also be published. USD-JPY has resistance at 113.38-40.

                [GBP, USD]
                Cable has recouped most of the losses seen after UK data, where retail sales unexpectedly contracted by 0.5% m/m. The pairing printed a 1.2982 low, which is the lowest level seen since last September, and extending the present run lower into a third consecutive day. The Pound has since recouped back above 1.3000, although has remained about 10 pips below pre-release levels at 1.3018-20. There is a qualification behind the dip in retail sales, as the ONS stats office has stressed, in that hot weather and the national fixation on the World Cup combined to lower both footfall in non-food stores and online purchases, which more than offset strong food store sales. The underlying trend also remains strong, with retail sales rising 2.1% q/q in the three months to June, which is the largest increase since the three months to February 2015, with growth seen across all the main sectors. The data maintains our call for the BoE to hike the repo rate by 25 bp on August 2, although this is admittedly now a less-than-full-conviction view following the unexpected dip in UK core CPI to 1.9% y/y from 2.1%. Brexit remains in sharp focus given the fragility of both the prime minister and the government, with ideologically-driven Brexiteers MPs threatening disruption. We continue to see directional risks to Cable as being greater to the downside than to the upside.

                [USD, CHF]
                EUR-CHF has settled in the lower 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The commáents affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

                [USD, CAD]
                USD-CAD turned back below 1.3200 after peaking yesterday at 1.3259, which is a three-week peak. Fed chair Powell's upbeat view of the U.S. economy, along with recent hefty declines in oil prices, formed a cocktail of bullish narratives for USD-CAD. We retain a bullish view of the pairing, looking for a revisit of the June highs at 1.3384-87. Support comes in at 1.3146-68.

                XE Currency Blog

                Topics5499 Posts5544
                By XE Market Analysis July 19, 2018 3:22 am
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 3693
                  XE Market Analysis: Europe - Jul 19, 2018

                  The Dollar has mostly traded in narrow ranges so far today, consolidating at softer levels after coming off highs yesterday. The Australian Dollar rallied on a stronger than expected Australian jobs report, which showed employment rising 50.9k in June from an upwardly revised 13.4k gain in the month prior. AUD-USD rallied to a high of 0.7441, subsequently drifting back to the 0.7410 area. EUR-USD settled in the mid 1.1600s, coming under some pressure into the London interbank open, after yesterday posting a two-week low at 1.1601. USD-JPY made time in the upper 112.00s after yesterday capping out at 113.13, which is the loftiest level the pairing has seen since January. USD-CNY, meanwhile, posted a near one-year low. We retain a generally bullish view of the dollar, rooted on the strong U.S. economy and the Fed's course to further rate hikes.

                  [EUR, USD]
                  EUR-USD settled in the mid 1.1600s, coming under some pressure into the London interbank open, after yesterday posting a two-week low at 1.1601. We remain bearish of the pairing, based on the prognosis for strong U.S. economic growth and the Fed's tightening course, while any move from Trump to follow-through on hits threats to tariff car imports would likely be negative for the Euro relative to the Dollar. EUR-USD has resistance at 1.1660-62 while the July-2 low at 1.1591 provides a downside waypoint.

                  [USD, JPY]
                  USD-JPY has been making time in the upper 112.00s after yesterday capping out at 113.13, which is the loftiest level the pairing has seen since January. Buoyant global stock markets, where upbeat Q2 corporate earnings, and expectations for more, have offset concerns about trade protectionism for now, which has allowed the Yen's safe haven premium to unwind some and for markets to focus on bullish fundamentals (i.e. contrasting policy paths of the Fed and BoJ). A report from last Friday that the Japanese central bank will likely cut its long-term inflation projections, according to unnamed sources cited by Reuters, has continued to resonate. The sources suggested that the BoJ will concede that CPI will likely remain below the 2% target for as long as three more years, and highlight structural factors that are capping inflation. The central bank meets on policy on July 30-31, when a quarterly revision of inflation and growth forecasts will also be published. USD-JPY has resistance at 113.38-40.

                  [GBP, USD]
                  Sterling has settled off lows after diving yesterday concomitantly with UK yields, which followed softer than expected inflation data. Cable hit a low of 1.3009, the lowest level seen since last September, while EUR-GBP printed a four-month high at 0.8932. UK June CPI unexpectedly held unchanged at 2.4% y/y versus the median forecast for a rise to 2.6% y/y, while core CPI fell to 1.9% y/y from 2.1% y/y in May, contrary to the median expectation for an unchanged reading. The data reduces the odds for the BoE to tighten at the August MPC meeting. One of the supporting arguments behind the BoE's guidance for gradual tightening is that a tight labour market and low productivity growth will conspire to drive wages and consumer prices up, though this clearly hasn't been transpiring yet. This comes with markets fretting about a disorderly Brexit process. BoE Governor Carney on Tuesday warned of "big economic consequences" to the economy in the event of a no-deal exit from the EU, although he stressed that it would be "premature" for the central bank judge things will proceed while emphasizing that the UK banking sector was appropriately capitalised for a over-the-cliff-edge Brexit scenario. Regarding BoE policy, our view is for a 25 bp hike in the repo rate to be announced on August 2, but this has now become a more tentative call, while any such move would likely accompanied with guidance for on hold policy thereafter.

                  [USD, CHF]
                  EUR-CHF has settled in the lower 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The commáents affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

                  [USD, CAD]
                  USD-CAD turned back below 1.3200 after peaking yesterday at 1.3259, which is a three-week peak. Fed chair Powell's upbeat view of the U.S. economy, along with recent hefty declines in oil prices, formed a cocktail of bullish narratives for USD-CAD. We retain a bullish view of the pairing, looking for a revisit of the June highs at 1.3384-87. Support comes in at 1.3146-68.

                  XE Currency Blog

                  Topics5499 Posts5544
                  By xemarketanalysis July 18, 2018 4:01 pm
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                    xemarketanalysis Posts: 486
                    XE Market Analysis: Sterling Plummets to a Multi-Month Low

                    OVERVIEW

                    • The Pound slid to a 10-month low against the US Dollar today.
                    • Dollar Index hits two weeks high on positive tone from Powell.
                    •  US 2-year treasury yields hit decade highs of 2.62%.

                    HIGHLIGHT

                    The Pound continues to struggle in general as the political instability and lack of increasing yield hounds the Sterling. Brexit negotiations continue to rumble on as Theresa May tries to negotiate a strong and lasting trade relationship with Europe while facing a significant challenge from her own government back home. The Brexit "Grey Cloud" continues to hang over the British currency and looks like it may be there for some time to come. 

                    US DOLLAR

                    The US Dollar is broadly stronger today after comments from Fed Chair Jerome Powell on the strength of the US economy struck a more positive tone than markets had expected. The FED Chair downplayed the trade tariff issue and said the US economy is on track for steady growth. 

                    BRITISH POUND

                    The Pound has tumbled lower today across a basket of currencies as an August interest rate hike seems less likely now. UK CPI inflation dipped to 2.4% in June against an expectation of 2.6%, making it more difficult for the BoE to act in August. The Pound was still nursing a Brexit Bill vote hangover and couldn't deal with this news.

                    EURO

                    The Euro has drifted marginally lower against the majority of major currencies today as the focus was mainly on the weak Pound and Greenback being on the front foot. The single currency lost ground against the US Dollar as trade concerns were eased by FED Chair Powell. 

                    CANADIAN DOLLAR

                    The Loonie is weaker today, especially against the resurgent US Dollar. The price of crude oil dipped to a three month low today as US inventory numbers were higher and questions over global demand arose. 

                    AUSTRALIAN DOLLAR

                    The Aussie Dollar continues to feel the wrath of higher US Treasury yields. US short-term paper now pays over 0.5% more than the same Aussie debt, making the Aussie Dollar very unpopular for investors. The Aussie was further weakened by the drop in the price of commodities such as gold. 

                    FEATURED CURRENCY

                    XE Currency Blog

                    Topics5499 Posts5544
                    By XE Market Analysis July 18, 2018 3:21 pm
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                      XE Market Analysis Posts: 3693
                      XE Market Analysis: Asia - Jul 18, 2018

                      The Dollar index lost a little ground in N.Y. trade on Wednesday, touching 94.99 lows after opening at 95.31, a three-week high. Weaker U.S. housing starts dented USD sentiment to a degree, while the remainder of losses came on the back of light profit taking. EUR-USD topped at 1.1662, while USD-JPY dipped to a low of 112.72. USD-CAD eased to 1.3170 lows, while Cable recovered toward 1.3170.

                      [EUR, USD]
                      EUR-USD was on the rise through much of the N.Y. session, opening at 1.1602, a near three-week low, then later peaking at 1.1662 into the London close. Sellers reportedly stepped in ahead of the 20-day moving average, which sits currently at 1.1668. The pairing has since fallen back to 1.1645 lows. Given the divergent policy paths of the Fed and ECB, and strong U.S. economic growth, we see further downside room for EUR-USD.

                      [USD, JPY]
                      USD-JPY was pushed to 112.72 lows ahead of the U.S. housing data, from pre-N.Y. open highs of 113.03. Selling reportedly came from option backed accounts, ahead of the expiry of 113.00 strikes at 10:00 ET. The pairing later inched up to 112.88, though remained in a narrow range into the close.

                      [GBP, USD]
                      Sterling dove with UK yields on the inflation miss in UK data. Cable hit a low of 1.3009, the lowest level seen since last September. UK June CPI unexpectedly held unchanged at 2.4% y/y versus the median forecast for a rise to 2.6% y/y, while core CPI fell to 1.9% y/y from 2.1% y/y in May. The data reduced the odds for the BoE to tighten at the August MPC meeting. BoE Governor Carney yesterday warned of "big economic consequences" to the economy in the event of a no-deal exit from the EU.

                      [USD, CHF]
                      EUR-CHF has settled back in the mid 1.1600s, down from the eight-week high seen earlier in the week at 1.1714. SNB's Maechler said late last month that the Franc "remains highly valued" despite the depreciation seen over the last year, arguing that "we are in extraordinary times and we are using unconventional measures." The comments affirm that the SNB is firmly on hold, with Maechler admitting that the SNB's monetary policy room for manoeuvre is "necessarily" affected by the actions of ECB and Fed.

                      [USD, CAD]
                      USD-CAD topped at three-week highs of 1.3259 at the North American open, before pulling back to 1.3228 lows at mid-morning. Commodity price weakness, specifically oil and gold, have supported the pairing of late. WTI crude remains near one month lows, trading in the mid-$67 range, while gold is on one-year lows, under $1,225.00. Later, the pairing pulled back to session lows of 1.3170, as reports that the U.S. may want to negotiate trade deals separately with Canada and Mexico made the rounds. This had been floated back in June, but kind of never went anywhere. As for the Peso, USD-MXN slipped to 18.807 lows from 19.040.

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