Morning brief for April 18

Morning brief for April 18

The biggest market-moving event in the past sessions was Steve Mnuchin’s interview with the Financial Times. US Treasury secretary rebuffed suggestions that US authorities might be seeking to depreciate the currency via verbal interventions following the comments given by Mr. Trump last week. Mnuchin believes that a strong dollar is a good thing in the near-term future for the US, but he agreed with the US President’s comments on the dollar’s strength undermining the competitiveness of the US exports. The likelihood of further delays to any tax reforms has also been mentioned in the interview.

Federal Reserve Vice Chair Stanley Fischer was also speaking in the US evening. He gave his comments on the Federal Reserve reductions of the size of its balance sheet and added that there shouldn’t be any market disturbance around this tightening measure.

Escalating tensions over North Korea after Sunday’s failed launch of missiles has also dragged on the greenback. US Vice President Mike Pence promised to offer the US assistance in fighting with irrepressible Kim Jong-Un. He is expected to discuss the defense and security issues with Japanese Prime Minister Shinzo Abe and some economic issues with Japan’s Deputy Prime Minister Taro Aso. North Korea’s deputy representative to the UN accused the US of creating a situation where Korean nations are one pace away from nuclear war. He also claimed that Pyongyang’s next nuclear would take place at a time and at a place the North Korean officials deem it necessary.

USD/JPY ticked above 109.20 in the session, but then slipped to 109.05. The sudden swing higher was unexpected. The key resistance level at 109.30 still holds. A break of this level might lead to a further appreciation of the USD to 109.75. On the downside, there is a strong support at 108.80.

EUR/USD surged above 1.0650. The euro has a scope for a further valuation. The level 1.0670 would a strong hurdle to break to move higher. The immediate support can be found at 1.0625. Meanwhile, nervousness on French elections is becoming greater with almost a third of the electorate still undecided, and the front-runners having almost the same chances to pave the way for the second round. As Edouard Lecerf, head of the political department at polling firm Kantar Sofres aptly noted: “French voters are like fish, like eels – very slippery”. It is going to be one of the most unpredictable races in the French history.

Aussie was the biggest loser in Tokyo morning. It slid ahead of the RBA meeting minutes and a little more to 0.7530 upon the publication. The board judged labor and housing markets need to be carefully monitored in coming months. The RBA minutes envisaged rising risks in household debt, housing markets, persistently weak employment growth. Policy response can involve additional rate cut.

Kiwi rallied above 0.7010 ahead of the New Zealand Global Dairy Trade auction (it will likely be an additional driver for NZD). Undertone is still positive, another leg higher towards 0.7035 still seems likely.

USD/CAD dropped below 1.3320. The focus will be on the Governor Council Member Wilkins’s speech scheduled for 7:45 pm MT time.

Brent oil futures slid to $55.35, and crude oil WTI futures fell to $52.60 on the concerns over rising US oil production. 

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