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XE Market Analysis: Asia – Sep 30, 2016

Firmer Chicago PMI and consumer sentiment data helped the dollar in N.Y. on Friday, though reports of a greatly reduced Deutsche Bank fine turned EUR-USD and equity markets sharply higher. EUR-USD based at 1.1154 early in the session, before rallying to 1.1250. USD-JPY found support into 101.10, and later topped near 101.45 as Wall Street rebounded. USD-CAD fell to 1.3087 following stronger Canada GDP data, and firm oil prices. Cable meanwhile, meandered on either side of 1.3000.

EUR-USD topped at 1.1250, coming from opening lows near 1.1150. The move was apparently driven by talk that Deutsche Bank’s DoJ fine may be reduced, according to Bloomberg. Twitter reports centered on a $5 bln fine, versus the $14 bln initially called for by the U.S. government. The pairing is up from eight-session lows, though in the bigger picture, the pairing remains ensconced near the middle of its one-month trading band.

USD-JPY has posted only a modest bounce today, topping at 100.45, remaining well under overnight highs of 101.77 seen in Asia, even as risk appetite returns. Week, month and quarter end conditions have kept FX trade quiet overall today, though we continue to see downside potential as the BoJ stalls its stimulus program, and as the Fed remains in the middle of the road with regards to a rate hike.

Cable was fairly steady in N.Y. on Friday, ranging between 1.2945 and 1.3023. This was another day of relative stability for the currency, which through to Monday had seen a three-week period of declines versus the G3 currencies and other units. The fact that sterling held up well on Wednesday after BoE deputy governor Shafik said that “further monetary stimulus will be required at some point” is telling of where market positioning and sentiment is right now.

EUR-CHF rallied back from one-month lows seen on Thursday, topping at 1.0912 as Deutsche Bank concerns were allayed by reports the Bank would pay a greatly reduced U.S. fine. Bigger picture, after seeing a one-year low at 1.0623 on June 24, in the immediate wake of the UK’s vote to leave the European Union, EUR-CHF looks to have settled, albeit with some chop and occasional SNB assistance, in an orbit centred around 1.0800-1.0900.

USD-CAD fell back to 1.3087 lows from over 1.3180 following the better Canada GDP data. The pairing had rallied overnight to 1.3195 highs as oil prices gave back some gains, though WTI crude bounced to $47.96 from lows of $47.05, adding support to the CAD. Week, month and quarter end conditions kept liquidity low through the session, generally increasing volatility.

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