Swissquote - Analytics


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    FX going nowhere

    Market Brief

    G10 Advancers and Decliners vs USD
      NZD 0.07
      SEK 0.05
      NOK 0.03
      CAD 0.02
      CHF 0.01
    EUR -0.10  
    DKK -0.12  
    GBP -0.15  
    JPY -0.16  
    AUD -0.18  
    Global Indexes Current Level % Change
    Nikkei 225 Index 16646.34 0.4
    Hang Seng Index 19915.66 -0.69
    Shanghai Index 2833.1 -0.13
    FTSE futures 6076.5 -0.86
    DAX futures 9948.5 -0.3
    SMI Futures 7866 -0.35
    S&P future 2062.6 0.22
    Global Indexes Current Level % Change
    Gold 1271.44 -0.44
    Silver 17.31 -0.6
    VIX 14.69 7.77
    Crude wti 46.2 -0.23
    USD Index 93.99 0.17


    FX going nowhere

    Financial markets continued their back and forth with risk appetite, as limited news flow provided little for traders to grab onto. FX implied volatility continued to decline sharply as FX ranges consolidated. Asia regional equity indices were mixed with the Nikkei up a marginal 0.30%, while the Shanghai composite and Hang Seng declined -0.35% and -0.27% as disappointing earnings weigh on stocks. European futures are pointing to a lower open. USD remained basically unchanged in the Asian session but gained against the JPY, AUD and CNY (which weakened for a third straight day), while losing to KRW and MYR. In our view, AUD range weakness was driven by events in China and commodities, rather than domestic developments, such as the revelation that Australian PM Malcolm Turnbull was named in the Panama papers. AUDUSD felt steady selling pressure fall from 0.7380 to 0.7330. Crude oil was weaker as expectations for a steady return of Canadian oil sand output increased. EURUSD spent another session stuck in a 20pip choppy pattern. USDJPY bounced off the 108.23 low, climbing to 109.00 as BoJ Kuroda and PM Abe's aide Ito provided verbal support for JPY weakness. In Brazil, markets are on tenterhooks as they wait for the senate to vote on President Rousseff’s impeachment and brace themselves for further social unrest. However, despite the uncertainly and accompanying credit downgrades BRL continues to strengthen against the USD. Elsewhere in South America Venezuela begins proceedings to remove President Maduro.

    The UK will be in the spotlight today with the BoE MPC meeting, meeting minutes and release of the BoE inflation Report. In regards to the BoE rate decision, we are in line with the market and expect no change in policy. Traders will focus on the accompanying press conference for any discussion on “Brexit.” Judging from yesterday's weaker industrial production read, which indicated slowing expansion of a meager 0.3% m/m, we could get a downbeat Inflation Report. The committee is expected to lower growth forecasts for domestic and international while CPI inflation forecasts risk is expected to remain unchanged but risk is to the downside. Furthermore, markets will be critical of how the inflation report handles the “Brexit” issue and what it forecasts post-June 23rd. We suspect that the outcome will have a profound effect on both UK growth and the inflation outlook, which so far the BoE has not acknowledged. The sterling is now up against headwinds in political & event uncertainty and high sensitivity to risk aversion. GBPUSD false breakout above 1.4700 is running into resistance at the 1.4800 supply area, indicating a reversal in the bullish momentum. We anticipate a bearish correction to 1.4298.

    In Europe, March industrial production is expected to rise to 0.0% from -0.8% m/m. Yet, gauging from weak national reads the risk is for disappointment. We suspect that the EURUSD will remain range-bound 1.1200 to 1.1600 ahead of the single-currency threatening “Brexit” vote. Norway interest rate decision expected no change at 0.50% and 1Q GDP will be release with markets expect 0.1% from -1.2% q/q.

    In the US, a slew of speakers Cleveland Fed President Mester (FOMC voter), Boston Fed President Rosengren (FOMC voter), and Kansas City Fed President George (FOMC voter) could provide insight into the Feds thinking. Mexico will release industrial production expected to expansion at 0.1% m/m, with any upside surprise to be due to strong construction activities.

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