FX Treads Water into Week’s End

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Market Drivers February 23, 2018
FX Steady
EZ Inflation cooler
Nikkei 0.72% Dax 0.00%
Oil $62/bbl
Gold $1328/oz.
Bitcoin $10100

Europe and Asia:
EUR EZ GDP 2.3% vs. 2.3%
EUR EZ CPI 1.3% vs 1.3%

North America:
CAD CPI 08:30

Currency markets were very sedate on the last trading day of the week with most of the majors moving in 30 pip bands in subdued Asian and early European trade.

The economic calendar is sparse with only a smattering of GDP and CPI data out of Eurozone that had little impact on EURUSD trade. EZ GDP came in line at 2.3% and inflation did as well at 1.3% annual rate, though month over month core was lower than projected at -1.7% vs. -1.6%. The inflation data confirms the current stance of the ECB to maintain the QE program at least until September timeframe and should temper any euro rallies for now as monetary policy remains decidedly dovish for the time being.

Earlier in Asia, New Zealand Retail Sales came in stronger than expected at 1.7% versus 1.4% as 11 of 15 sectors showed an increase in sales. Despite the better than expected results kiwi slid all night long dropping below the .7300 figure. There was little to account for the move except for end of week profit taking on the crosses and generally, the pair remains one of the stronger currencies against the buck, but it is vulnerable to a further selloff if US yields continue to rise.

In North America today, the only report of note today is the Canadian CPI data with the market looking for rise to 0.4% from -0.4% the month prior. The core number is expected to remain muted at 1.2% and if it meets the forecast, the loonie could see further weakness as the BOC will likely remain stationary for the time being. However, if the Canadian data much like US data this month surprises to the upside, USDCAD could quickly drop to 1.2600 as market expectations will change radically.

Overall, however, the market appears to be at a standstill and crosscurrent from risk aversion to yield differential continue to keep currencies range bound with little clear direction for traders to follow. Unless equity markets see a sharp move, FX is likely to remain steady into the weekend.

Boris Schlossberg
Managing Director

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