XE Market Analysis: Asia - Jun 23, 2021

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The Dollar slipped some in early trade, seeing the DXY bottom at 91.51 from overnight highs of 91.90. The USD later bounced some, after most major currencies hit one-week lows versus the Greenback. Incoming data saw mixed Markit PMIs, and a weaker new home sales outcome, the latter of which, took the USD to its lows of the day. Wall Street was in consolidation mode, with the major indices trading on either side of unchanged. The Fed appears to have sufficiently calmed inflation fears this week, which has seen Treasury yields rangebound, and has kept a general bid under equites for now. Given better prospects for continued U.S. growth in H2, we see further upside potential for the Greenback. Thursday's U.S. calendar features the third release of Q1 GDP, where we expect an upward revision to 6.5% from 6.4% previously. Q1 chain prices are seen unchanged at 4.3%. Weekly jobless claims are due, along with the May durables report, where orders are expected to rise 3.0% versus the prior -1.3% outcome. The May advance goods trade report and advance May wholesale and retail inventories are due as well.

EUR-USD peaked at 1.1970 in early N.Y., since ebbing back to 1.1940 after the London close. The pairing had bottomed at 1.1912 in London. Solid preliminary June PMI survey data out of the Eurozone, which saw the composite reading hit a record high of 59.2, was perhaps supportive of the pairing at the margins, while remarks from ECB's Guindos that he expects "very significant" growth in the second half of the year were largely shrugged off as well. Looking forward, we continue to see downside risk for EUR-USD, as growth differentials should continue to favor the USD. Lows under 1.1850 seen earlier in the week look to be the next support level.

USD-JPY topped at 15-month highs of 111.11 into the N.Y. open, since falling back under 110.70 at mid-morning. Profit taking, prompted by reports of Japanese exporters on the offer over the 111.00 mark was the likely culprit behind the modest pullback. As Fed officials rein in U.S. inflation fears, including comments from Chair Powell on Tuesday, who said it's "very, very unlikely" the U.S. will see 1970s-style inflation, equity markets are liable to retain their bid overall, which could ultimately see further gains for the risk-sensitive USD-JPY.

Cable printed a one-week high of 1.4001 in early N.Y, rallying from overnight lows of 1.3925, aided by a generally weaker Dollar. The BoE policy announcement looms Thursday. We think those looking for a shift in guidance will be disappointed, however. The wage support furlough scheme will terminate at the end of September. While BoE's Vlieghe has said that an "early" rate hike was possible, this depends on there being a smooth transition out of the furlough. The question is whether the reopening economy will be strong enough to absorb this potential slack. The preliminary June PMI survey data out of the UK showed an unexpected dip in private sector activity, with the composite reading edging to a 2-month low of 61.7 from the series record high of 62.9 that was seen in May.

The Swiss National Bank was on hold at its June meeting. Overall policy settings remain unchanged and the SNB remains committed to ensure generous liquidity supply and low rates, while keeping a lid on the CHF by intervening in currency markets. Like elsewhere in Europe, the growth outlook has improved somewhat and officials expect strong growth in the second and third quarters, but for now uncertainty remains high, though with inflation still very low, the SNB can afford to take a very gradual approach, while relying on the countercyclical capital buffer to keep risks from real estate bubbles under control.

USD-CAD printed six-session lows of 1.2253 in early North America, down from overnight highs of 1.2329 seen in Asia. There was little CAD reaction to the Canada retail sales, which came in softer than expected, though mitigated by prior upward revisions. Another trend high in WTI crude this morning of $74.23 has given the CAD a boost, while the USD overall has struggled some this morning. The DXY touched a one-week low of 91.51 earlier, down from 91.90 overnight. USD-CAD support now comes at the 50-day moving average at 1.2223, with resistance at 1.2300.

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