Mnuchin Helps Dollar to Find a Modest Bid

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Market Drivers April 19, 2017
USDJPY rallies towards 109.00 on Mnuchin comments
EZ CPI in line
Nikkei 0.22% Dax 0.07%
Oil $52/bbl
Gold $1283/oz.

Europe and Asia:
AUD Motor Vehicles
EUR EZ CPI 1.5% vs. 1.5%

North America:
USD Biege Book 14:00

The dollar was mildly better bid in Asian and early European trade today with USDJPY inching its way back towards the 109.00 level in quiet uneventful trade.

There are no major economic releases on the docket today and most of the majors were content to remain in narrow ranges after yesterday will wild and volatile session in the wake a surprise announcement by Theresa May to call snap elections June 8th.

Cable was much more subdued today, but remained above the key 1.2800 level throughout the night, after clearing three big figures yesterday. The pair now faces resistance at the 1.3000 level and may make a run towards that figure if UK data proves supportive at the end of the week.

In Europe the latest CPI data came in line at 1.5% with core printing only at 0.7%. The numbers are well below ECB targets and suggests that reflation remains elusive in the region prompting speculation that Mr. Draghi may sound a less hawkish note at the next ECB meeting a week from Thursday. For now, the main focus for the euro is the French election with polls continuing to be remarkable stable ahead of the Sunday vote. The consensus view is the Mr. Macron and Ms. Le Pen will make it into the second round of voting in May with Mr. Macron enjoying a wide double digit lead against Ms. Le Pen in a head to head contest. Such an outcome should provide some relief for the euro, but with the race essentially a four way tie anything can happen.

The dollar’s rebound today was driven in some part by comments from Treasury secretary Mnuchin who walked back the statements made by President Trump last week. Mr. Mnuchin noted that Mr. Trump was “absolutely not trying to talk down the dollar.” He continued, “The president was making a factual comment about the strength of the dollar in the short term . . . There’s a big difference between talk and action.”

Despite, Mr. Mnuchin rhetorical support, the greenback is clearly on the back foot as US data shows that growth has stalled. Any pop in USDJPY will likely be seen as an opportunity to establish fresh shorts at better levels and only a move back above the 110.00 figure would signal a more bullish posture in the pair.

Boris Schlossberg
Managing Director

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