Analysis made at the close of the US market by Kathy Lien, CEO of Strategy FX at BK Asset Management.
US stocks rose sharply on Thursday, all major currencies have gained positions with the exception of the euro , which fell for the first time in five trading days.The massive sale was determined by the ” minutes ” of the last meeting of the central bank, which highlighted some of the concerns of the European Central Bank (ECB).The central bank generally considers that the economic risks are down due to the widespread concern about trade disputes.
They also “agreed in general” that there is not enough evidence to describe inflation as sustained. The interesting thing is that this does not coincide with the individual comments of Draghi and Nowotny , a member of the ECB, which have been more positive than negative in terms of monetary policy. Nowotny even asked for asset purchases to be canceled this year.
Keeping in mind that the “minutes” of the meeting in early March, we believe that Draghi’s recent optimism better reflects how they feel right now. But with the data do not stop surprising on the downside, so the euro could still expand its decline to 1.22, the lower part of the range where it has recently been.
The rebound in stocks and the recovery of USD / JPY are linked to the lack of news about Syria. So far, President Trump has not announced a military attack, although he said this morning that an attack on Syria “could be imminent or not so imminent.” During the day, it was learned that the United States plans to attack eight targets even though it is not For now, no news is good news for the markets, which have welcomed the convoluted statements of the president.
Unemployment subsidy applications increased slightly while imports and exports increased at a slower pace. The consumer confidence index of the University of Michigan is published on Friday. Although the USD / JPY closed the trading day in New York above 107, and remains confined to a narrow range of between 106.50 and 107.50. It would be necessary to leave any of these levels to usher in a new trend for the USD / JPY.
One of the currencies that has offered the best performance this week is the pound , which has gained positions or has remained stable each of the last 5 trading days. Thursday’s move led the pair a short distance from its two-month highs above 1.42. The remarkable thing is that the pound has been able to ignore worse data than expected and the lack of progress on the issue of the Irish border according to the chief negotiator of the European Union for Brexit, Michel Barnier. It is not expected that an agreement will be reached in the coming weeks, which means that they do not expect any short-term progress on the Brexit. Although the GBP / USDhas advanced quite a bit, there is a lot of resistance between 1.4250 and 1.4300.
The New Zealand dollar expanded gains while the Australian and Canadian dollars were consolidated. The increase in credit card spending has driven more the advance while the decrease of the expectations of inflation to the consumption of Australia has triggered the sale of AUD / NZD . PMI figures for New Zealand’s manufacturing sector are published on Thursday and in view of the currency’s performance and the latest data, investors expect another positive report.
The AUD and NZD traders also await China’s trade figures . A reduction in the trade surplus could add pressure to the AUD / USD , which finds some resistance between 0.7785 and 0.7810. The USD / CAD pair briefly stood above 1.26 before closing the day below the round number. Although housing prices have declined according to the latest reports, oil prices expanded profits.
President Trump has also declared that they are about to reach an agreement on NAFTA but his decision to cancel a trip to this region (he said it was in order to focus on Syria) and the decision of Lighthizer, the US trade representative, To renounce to participate in the NAFTA summit in Peru that begins this Friday indicates that no agreement will be reached this weekend. As a result, it is possible that the USD / CAD closes the week with a profit pick-up in a rebound that could return the pair to its levels above 1.26.
