Euro Crash: 1.10 Next? |


Daily Exchange Market Report March 22, 2019

Kathy Lien, Managing Director, Foreign Exchange Strategy for BK Asset Management

What a difference a week can make on the foreign exchange market. There have been three big revelations: the Federal Reserve is not expecting a further increase this year, Europe is on the verge of recession and the UK has benefited from a brief extension unsatisfactory Article 50. As a result, the bindings turned into ruptures when economic data and central bank policy gave investors a clearer idea of ​​where money and other currencies should go. The greenback closed the week down sharply, but against the dollar and higher. At some point after the Federal Reserve meeting, it seemed like it could be a week when all major currencies would be pushed up by the depreciation of the US dollar. However, a less aggressive Fed can hurt the dollar as much as when the biggest problem is weaker global growth. We expect many of the new trends set last week to continue because, even though the economic calendar is busy, this week's events are not as dynamic as the last market and have much less potential to completely change their market. feeling.

Friday's weakest currency was the, which fell after the terrible PMI data. The EUR / USD broke 1.13 in a few minutes after the PMIs fell to their lowest multi-year level, raising fears that Europe may be on the brink of a recession. Germany is the hardest hit by the contraction recorded for the third consecutive month at its fastest pace since August 2012. This has led the country index to its lowest level since June 2013. France also reporting an activity slower in this sector, the euro area fell to 51.3 from 51.9 in March. Investors were worried about growth after the ECB lowered its forecasts earlier this month and PMI reports released on Friday show the extent of these concerns. European car prices are likely to be subject to a salt supplement. President Trump said Wednesday that the EU has been very tough with the United States for many years and that "we were looking for a way to fight." The German became negative for the first time. time since October 2016, resulting in the fall of EUR / USD to an intra-day minimum of 1.288. Although the Fed no longer plans to raise rates this year, the ECB will not do it until the Fed takes another decision. Technically and fundamentally, 1.10 is still a viable target for the currency as it easily eliminates 20, 50 and 100 day ADMs.

Meanwhile, British Prime Minister May finally called for an extension of Article 50 by three months and the European Union approved a delay, but not the one she was looking for. They said that if May can persuade Parliament to accept the current withdrawal agreement, the UK will leave the EU on May 22, a day before the elections to the European Parliament. However, if it fails, they have until April 12. They will then have to decide if the current contract, no agreement or no Brexit is their next course of action. The EU says in the UK that for better or for worse, they want to be done with Brexit. They refuse to be trapped in a long extension. Unfortunately, this means that a disruptive Brexit is still on the table, so even if it ended the week, the risk is going down. Brexit completely overshadowed data from the Bank of England and the United Kingdom. The BoE voted unanimously to leave interest rates unchanged and said that Brexit could result in two-way policy changes. They also warned that job growth could drastically slow down, more and more companies triggering plans without agreement with Brexit. Instead of falling, the pound sterling rebounded after the rate decision, as the central bank said that "a gradual and limited tightening is probably necessary". The UK has also released stronger reports than expected. However, nothing has counted for the GBP except Brexit and this will remain the case for the next few weeks.

The unexpected fall of Canadian securities at the beginning of the year sealed the loonie 's fate. surpassed 1.34 after a drop in retail sales of -0.3% for the second consecutive month. The Bank of Canada's arguments for transparency are becoming stronger every day as a craze for spending and trade. are scheduled for Friday, and growth could further decline. The only good news was the 0.7% rise in February, but at 1.5%, growth continues to be well below central bank targets.

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