Daily FX Wrap: A very quiet day overall, as intra day players continue to hunt for stops all round. UK average earnings rise modestly, but claimant count rises. GBP still pushing for better levels, while EUR pressured. CAD pushes through 1.3300 as BoC brings forward output gap close to H1 2018
It has been a very quiet trading day in Europe, with the only notable data release coming in the form of UK jobs, which produced a slightly higher than expected earnings component, which has effectively been negated by the pick-up in inflation. Traders are still feeding off the bid tone seen over the last few days, and ignoring the sizeable rise in the claimant count as Brexit fears also seem to have subsided of late. Bar the odd headline on how the UK will develop once out of Europe, we have little colour on now the negotiations will pan out ahead, with the first port of call being the exit payment, but news limited on this of late. The House of Commons returns on the 18th April from its recess from the end of March.
Cable snapped up to just shy of 1.2520 on this morning’s data release, but having settled in the middle of the day’s range circa 1.2500 suggests a retest later or lack of volume. In the meantime, EUR/GBP continues to press on trend-line support around 0.8480, with real money demand at sub 0.8500 levels also containing the downside for now.
Pressure set to stay in the cross rate, as EUR/USD is still getting hammered well ahead of 1.0650. Despite holding 1.0570 earlier in the week (twice), the interbank market will not chase (squeeze) the pair higher with the French elections looming and the ECB standing pat on their accommodative stance after the recent taper ‘jitters’. Pan European HICP due out in the am session.
As such, EUR/JPY has fallen in tandem with the USD/JPY move below 110.00. The risk mood seems to have eased off for now, but we are still awaiting to hear more from the US Sec of State’s visit to Russia. Equity markets are in limbo in the meantime, with mid curve Treasury yields hovering around the recent lows – notably the 10yr just under 2.30%. Traders still feel there is a little more upside left in the JPY near term, but against the USD, we note demand ahead of 109.00, with plenty more anticipated through the 108.00’s. EUR/JPY has already found some support below 116.00, but as noted above, the single unit is an easy target at the present time.
Into the North American session, and the BoC rate call was widely expected to remain unchanged. However, the focus was on the accompanying statement, where traders were expecting a less cautious tone we have become accustomed to, but the only notable ‘move’ in this respect was bringing forward their forecast on closing the output gap – to H1 2018. They maintained it is too early to conclude whether the economy is sustainable path to recovery, citing no improvement in the labour market indicators over the past year – which was a surprise. USD/CAD still dipped below the 1.3300 level, but the fall was contained (initially) by demand into 1.3275 – 1.3220 the next level on the downside.
Not too much to note for the AUD or NZD, though we did see the latter pushed lower towards 0.6900 just as we thought the market was tentatively forming a base. 0.6900-6890 is a key support area. Ahead of the Australian jobs report, we expect to see some AUD consolidation, with 0.7450 the next support level to watch for in the meantime. We also see the release of the RBA’s financial stability review, but we expect greater focus on the China trade data due for
release at some stage.
email: [email protected]