Market Drivers March 28, 2018
USDJPY pops then drops
Cable flushed up and down
Nikkei -1.34% Dax -1.53%
Europe and Asia:
USD GDP 8:30
It’s been another seesaw night of trade in the currency market with cable and yen yanking both longs and shorts out of their positions as think markets, lack of data and end of month flows caused V-shaped moves in both Asian and European session trade.
In Asia, USDJPY was initially driven lower after yet another ugly close in equities in yesterday’s New York trade, but then news that Kim Jong Un visited China last week, infused a note of relief into the market as traders assumed that North Korea may be willing to make concessions on denuclearization on the peninsula. USDJPY rose all the way to 105.75 but dropped back when European bourses opened up lower.
In UK a story from Times suggested that UK may have come up with a fresh solution to the hard border issue with Ireland and that helped fuel a rally in cable in early Asia. The pair eventually was able to just take out the 1.4200 figure but then plunged in early Frankfurt on yet more end of month flows hitting a low of 1.4135 before finally catching a bid. The up and down action left both long and shorts befuddled, but once the real money supply is finished cable could make another foray towards the highs, especially if Brexit story proves true and progress has been made on the Irish border issue which remains the toughest political and economic barrier in the negotiations.
Meanwhile, USDJPY which remains battered is desperately trying to carve out some kind of a tradable bottom after months of selling price action. Today US GDP data is projected to print at 2.7% versus 2.5% eyed. If the number meet or beat the forecast they would provide the type of fundamental support that USDJPY has sorely needed. Stronger than expected growth could convince the market that US yields are headed higher and push USDJPY through the 106.00 figure as the day proceeds. A miss, however, would only confirm the bears worst impulses that US economic growth has actually peaked, that the Fed is behind the curve and that monetary policy may have to reverse quickly as aggregate demand slows, all of which could push USDJPY to fresh cycle lowe.