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Market watch - 26th April 2018

The US Dollar continues to trade on firm footing across the board, as the Buck hit a fresh 57-day peak in its pairing with the Euro, with EURUSD just a hair away from a 3.5-month trough after the European Central Bank (ECB) left its key Minimum Bid Rate at 0.0% as expected this morning and ahead of the key ECB Press Conference.  The Greenback is largely sideways versus Yen after USDJPY hit a fresh February 8 peak yesterday, hit a fresh 1.5-month high against the British Pound overnight, retraced versus the Mexican Peso which fell to a sharp 3.5-month low yesterday, and was sideways against the Swiss Franc after the pair hit a 4-month peak yesterday. The Buck fell a bit in its pairing with the Canadian Dollar, as the Buck fell against the Commodity Currencies in general on an uptick in both oil and risk appetite and Bank of Canada (BoC) Governor Stephen Poloz expressed positive sentiment on the Canadian economy yesterday.  The US Dollar index is trading at a four-month high with US 10-year Treasury yields trading above 3% yesterday and today.   Google and Facebook released very positive quarterly results which bolster confidence in corporate America and US equity markets.   On the data front, the US Goods Trade Balance and Durable Goods Orders MoM are up for release today, but all eyes are on the ECB meeting this morning.   The key quarterly US Advance GDP is scheduled for tomorrow morning.

The Loonie has ticked up against most of its rivals a bit after hitting a fresh 22-day low versus the greenback and 16-day trough against the Euro yesterday.   Rallying oil prices coupled with an uptick in risk appetite supported the commodity group in general, further positive sentiment regarding NAFTA negotiations, and BoC Governor Stephen Poloz stating that the economy is “finally positive” all bolstered the Canadian Dollar. While the BoC has been less hawkish than anticipated recently, there is still significant expectation they will raise rates at least once this year.  There is no Canadian data scheduled for release today.

The single currency is trading at a fresh 57-day trough in its pairing with the Dollar overnight after the European Central Bank (ECB) left its key Minimum Bid Rate on hold at 0.0% as expected this morning ahead of the eagerly anticipated ECB Press Conference.  European inflation and growth has been muted of late, and the German government cut its growth forecast yesterday to 2.3% for this year, with several ECB policymakers, including ECB President Mario Draghi, issuing dovish statements recently.   With EU Core inflation at 0.9% annual there is no change likely for interest rates in the near future.  Given recent comments by ECB Governing Council Member Villeroy lately, market participants will be watching for clues into future ECB policy moves and whether QE asset purchases could indeed continue past September despite previous ECB statements that this would be the end of this program.   Any hints regarding policy normalization will be closely watched.  

The British Pound touched a fresh 1.5-month low versus the Buck overnight but Cable is now largely sideways, and Sterling is trading at a one-week peak in its pairing with the Euro.  The EU has stated they could indeed offer the UK a say on trade policy if they stay in the Customs Union post-Brexit.  UK Brexit Secretary David Davis commented that there are huge trade opportunities outside the customs union, and continued that a solution on the Irish border could wait until December 2020 also.   On the economic front, it was announced that automobile production fell to a two-year low, CBI Realized Sales came in at -2 compared to -3 forecast.  High Street Lending was better than expected at 37.6K compared to 37.1K consensus, UK GfK Consumer Confidence is scheduled for release late in the US session.  UK quarterly Preliminary GDP is set for tomorrow morning with BoE Governor Mark Carney scheduled to speak as well.

The Aussie Dollar and Kiwi both rebounded from yesterday’s multi-month lows versus the Buck yesterday as oil prices rallied and risk appetite was stronger, which bolstered the antipodean Commodity Currencies overnight.  Australian Import Prices QoQ came in at +2.1% compared to 1.3% forecast consensus, and better than 2.0% for last month.  Australian quarterly PPI is scheduled for this evening along with the NZ Trade Balance also.

The Swiss Franc fell to a four month low versus the Buck yesterday on strong US yields coupled with its technical lows versus the weakening Euro.  The market shift in which traders are using the Franc as a favored funding vehicle for carry trades due to its deeply negative yield and high liquidity are continuing to weigh on Swissy as well.  With no change expected to SNB policy in the foreseeable future, higher US yields are putting very significant pressure on the Swiss Franc.

The Yen hit a fresh February 9 low in US trade yesterday as strong US yields pushed the Buck higher against nearly all of its rivals, but fell a touch and was largely sideways overnight.  That said, USDJPY is significantly higher this week, and has blown through some very significant levels.  The Bank of Japan (BoJ) monetary policy meeting is tentatively scheduled tonight with no change to policy expected, but market participants will be looking at their post-meeting press conference overnight.

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