ETHICAL CURRENCY DAILY BRIEF

 

 

The Ethical Daily Brief is a free email sent out each morning with information about overnight market movements and insights into the issues of the day. The brief is free and will help you keep an up-to-the-minute eye on the currency markets.

 

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Daily Brief - 19/04/2018

London Office

 

Euro

 

Reuters: The euro inched up 0.07 percent to $1.2383 after eking out small gains the previous day. The euro had weakened to a 14-year low the last time the yield spread was at the current width. But it has been relatively immune to the current yield spread widening.

 

The spread has increased more than 30 basis points over the past three months but the common currency has moved within a relatively narrow $1.2556-$1.2154 range.

 

US Dollar

 

Reuters: The dollar was steady against a basket of its peers on Thursday, supported by higher long-term U.S. Treasury yields on improving investor appetite for risk assets, though lingering concerns over U.S.-China trade tensions checked the greenback. The dollar index against a group of six major currencies was flat at 89.633 .DXY after edging up 0.1 percent on Wednesday.

 

The U.S. currency gained 0.15 percent to 107.410 yen, adding to the previous day's modest gains. The dollar’s gains were limited given the scope of the rise by the 10-year Treasury note yield US10YT=RR, which climbed more than 5 basis points overnight for its biggest one-day surge since March 2.“The dollar, particularly against the yen, has began re-establishing a correlation with widening yield differentials this month,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

 

South African Rand

 

BD Live: The rand was marginally firmer against major global currencies on Wednesday afternoon, gaining most against the pound, after positive retail sales and inflation figures provided a boost to sentiment. Earlier, consumer inflation moderated to an annual pace of 3.8% in March, despite a consensus forecast by economists of a slight acceleration from February’s 4%. This represented the lowest inflation level since February 2011, largely due to decreased fuel and food prices. While this is expected to be the low point of the current inflation cycle, it is also expected to remain within the Reserve Bank’s target range of 3% to 6%.

 

The better-than-expected inflation outcomes of recent months strengthen the case for accommodative monetary policy, Nedbank Group Economic Unit analysts. Retail sales in February also surprised to the upside, growing 4.9% year-on-year in February. Internationally, the pound was under selling pressure after inflation data from that country also came in lower than expected. While this drop was driven by the volatile components that were measured, the data still raised doubts about how quickly the Bank of England would tighten monetary policy — particularly in 2019, analysts said. At 3pm, the rand was at R11.9454 to the dollar from R11.9835, R14.8011 to the euro from R14.8205 and at R17.0079 to the pound from R17.1243. The euro was at $1.2391, from $1.2369.

 

Swiss Franc

 

Bloomberg: The franc is within striking distance of what was once one of the most heavily defended boundaries in global markets. Having touched a three-year low of 1.19 per euro on Tuesday, the franc is now less than a centime away of the 1.20 mark at which the Swiss National Bank had its minimum exchange rate until early 2015 -- enforcing it with what the central bank termed “unlimited” foreign exchange interventions. While the 1.20 level is largely symbolic, the franc’s weakening provides a potential milestone for SNB President Thomas Jordan and his colleagues, that may allow them to start imagining how to take interest rates back into positive territory after a decade on the front lines of unconventional monetary policy.

 

“We’re getting close to the famous limit, so it’s a relief for the SNB to have the franc where it is, but they’ll want to see a consolidation of the trend before doing anything,” said Nadia Gharbi, an economist at Pictet in Geneva. “From the communication side we might see a slight shift, but the SNB will still remain very prudent. There’s the risk of a trade war and the situation in Italy remains fragile.” Already, the SNB appears to be scaling back its interventions, taking advantage of a weaker franc thanks to a pickup in euro-area growth and an abatement of investor anxiety about European politics. While last year’s presidential ballot in France put pressure on the franc, the parliamentary election in Italy this year didn’t have the same effect.

Daily Brief - 19/04/2018

Hong Kong Office

 

British Pound

 

FXStreet: The recovery of the GBP/USD pair lost momentum during the last hours as the pound weakened again, this time after the UK upper house an amendment that challenges PM May’s Brexit policy of not remain in a customs union with the European Union after Brexit. The bill will return to the House of Commons.  Previously UK data pushed the currency sharply lower. UK Inflation showed lower than expected numbers for March and the lowest reading in a year. Cable dropped dramatically to 1.4172, reaching a 6-day. Then moved off lows supported by a retreat of the US Dollar. The recovery was capped by the 1.4245 area and as of writing, it was trading at 1.4205/10, down 75 pips for the day. 

 

The pair is falling for the second-day in-a-row accumulating a retreat of 200 pips from yesterday’s high at 1.4375.  To the downside, support levels might be located at 1.4205, 1.4170/75 (Apr 18 low) and 1.4140. On the upside, the immediate resistance could be seen at 1.4250, 1.4280 (Apr 17 low) and 1.4315. 

 

US Dollar

 

Reuters: The dollar was steady against a basket of its peers on Thursday, supported by higher long-term U.S. Treasury yields on improving investor appetite for risk assets, though lingering concerns over U.S.-China trade tensions checked the greenback. The dollar index against a group of six major currencies was flat at 89.635 after edging up 0.1 percent on Wednesday. The U.S. currency was steady at 107.250 yen having advanced 0.2 percent the previous day. However, the dollar’s gains were limited given the scope of the rise by the 10-year Treasury note yield, which climbed more than 5 basis points overnight for its biggest one-day surge since March 2.

 

“The dollar, particularly against the yen, has began re-establishing a correlation with widening yield differentials this month,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. “While the spreads between U.S. yields and those in Japan and the euro zone continue to widen, the dollar cannot take full advantage due to lingering ‘Trump risk’,” Ishikawa said. Ishikawa was referring to the broad uncertainty stemming from U.S. President Donald Trump’s trade and economic policies, as well as geopolitical posturing in the Middle East and elsewhere. The U.S.-China tariff standoff has heightened volatility in financial markets over the past month. The yen showed little response to the U.S.-Japan summit, at which Trump and Japanese Prime Minister Shinzo Abe agreed to intensify trade consultations between the two longtime allies.

 

Japanese Yen

 

FXStreet: USD/JPY has popped higher in recent trade, extending yesterday's double bounce from the 106.80's and is homing on yesterday's high of 107.38 while Tokyo's Nikkei 225 starts off well. Currently, USD/JPY is trading at 107.34, up 0.11% on the day, having posted a daily high at 107.39 and low at 107.18. USD/JPY jumped through the 21 and 100 hourly smas ahead of the open on broad-based yen weakness although is now attempting to break the previous day's highs here as the equities continue to edge higher in Tokyo with the Nikkei now at the highest level since late Feb. Overnight, the pair stuck to familiar space on the 107 handle between 107.10 and 107.40, ignoring higher US yields. The benchmark 10yr yield climbed from 2.82% to 2.87% while 2yr yields extended their multi-year uptrend to 2.43% - another high since 2008.

 

In recent trade, sound bites from the US / Japan Summit's press conference revealed the two nations looking to 'get along' as Trump would put it. Trumps wants a bilateral deal with Japan and said that "If we can come to an arrangement between US and Japan we would discuss taking all proposed steel and aluminium tariffs". Meanwhile, Abe is leaning to the TPP as the best trade deal for both Japan and US.

 

Global Markets

 

Reuters: Resource stocks were on a roll in Asia on Thursday as oil prices hit heights not seen since late 2014, though the potential boost to inflation globally also pressured fixed-income assets. Resource stocks were the big winners driving Australia’s main index up 0.6 percent. Japan’s Nikkei gained 0.4 percent, led by a 1.8 percent rise in basic material stocks. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.15 percent, while E-Mini futures for the S&P 500 edged up 0.1 percent.

 

Brent crude futures climbed another 34 cents in early trade to $73.82 a barrel, adding to a 2.7 percent jump overnight. U.S. crude gained 30 cents to $68.77. The leap in oil combined with fears that sanctions on Russia could hit supplies of other commodities to light a fire under the entire sector. Aluminum prices reached their highest since 2011, alumina touched an all-time peak and nickel jumped the most in 6-1/2 years.

 

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