Daily FX Wrap: A tight trading session on Monday where Friday limits have been retested. GBP and CAD outperform to the detriment of the EUR and AUD.
After a lethargic Monday session, we see the data schedule on Tuesday offering a little more for the intra day market to feed off; reduced to testing order levels across the board today. Risk sentiment hangs in the air given the geopolitical tensions focused on North Korea and Syria at the present time, but the newswires have been pretty light today, leading to some consolidation in the JPY pairs. USD/JPY looks to have run into some resistance in the mid 111.00’s, and given the above, the pick up in mid-curve yields will see buyers of Treasuries tempted back in.
For EUR/USD, the obvious trade is to the downside, as the French elections will have traders and investors looking for safety, pointing to EUR/CHF lower also. As such, the SNB may have their hands full over the next few weeks, but the illiquidity either side of the Easter break may work in their favour. In the meantime, support below 1.0600 in the lead spot rate has limited the downside to 1.0570 for now, but 1.0525-40 is where we see the stronger demand if we get there. On the data front, EU industrial production for Feb is accompanied by German and EU ZEW sentiment for Apr.
The economic releases in the UK will be of little more interest given the impact of current exchange rate levels. Inflation has been a bone of contention for the BoE, and given the detrimental impact on household incomes and commercial input prices, this is not a straight case of raising rates if CPI pushes higher. Indeed, orderly gains will be palatable, but the MPC are ever wary of a sharp overshoot given the growth stats are tailing off a little – apart from services PMIs. Cable has been paid back up through 1.2400 again today, but sellers expected into the 1.2450 area, after 1.2500 proved extremely heavy last week. EUR/GBP still pushing the downside, but we also saw snap back on the test of 0.8500.
Little of note in the US apart from Feb JOLTS late in the day – said to be one of Fed chair’s favoured measures. Nb, Janet Yellen speaks in Michigan late Monday. Kashkari speaks on Tuesday.
Inflation is also on the menu in Sweden; the country still reeling from the shock of the terror attack at the end of last week, which claimed 4 lives. The SEK has pulled off its lows from last week, with the market (thankfully) largely unresponsive through the markets. That said, CPI is forecast to pull back in tomorrow’s release, potentially reigniting a EUR/SEK push for 9.6500.
In the commodity pairings, the standout move of late has been AUD/CAD. We saw some decent selling here over a week ago, but AUD resilience saw the market loath to break away from the 1.0200 area. We have since seen a fall in AUD/USD through the 0.7500’s, and while we find some buyers below here, the resistance in USD/CAD from 1.3450 has proved more overwhelming. AUD/CAD is now testing parity as a result, but more downside likely if Oil prices continue to push higher – albeit on political tensions. NZD/USD has levelled off well ahead of 0.6900 – strong tech support seen around here. Overnight, the NAB business and confidence surveys the only release of note.
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