CNH takes the FX spotlight

<p>The FX market seems to be taking a breather from the extreme volatility that followed the FOMC meeting on Wednesday. The statement revealed the removal […]</p>

The FX market seems to be taking a breather from the extreme volatility that followed the FOMC meeting on Wednesday. The statement revealed the removal of the ‘patient’ phrase – as the market had anticipated – which gives the FOMC the flexibility to raise rates. However, the Fed’s dot plot showed a dovish picture with one less hike in 2015 than the market had priced in. Fed Chair Janet Yellen highlighted that a stronger dollar would have a drag on exports, and added that although they had removed ‘patient’ from forward guidance it would not mean the committee would be impatient. She emphasised that the timing of the first rate increase would be completely ‘data dependant’. As a consequence, this turned the dollar bearish which then spun it into free-fall.

The market is likely to remain in a consolidation period as we await the next catalyst. The US CPI data is released on Tuesday which will give some indication on inflation as we hear from FOMC members Dennis Lockhart today and Stanley Fischer on Monday. Reports this morning have suggested that the ECB is considering limitations on Greek banks buying Greek debt. The Greek PM Tsipras last night reconfirmed the Greek acceptance of the bailout program they agreed with creditors in February. The newly elected Greek administration need to appease the ECB, IMF and Euro group as they have some very large repayments over the summer months that need to be monitored for what can only be described as an ‘accidental default’.

The Asian session saw the CNH in the spotlight following a surprising fix for the onshore USD/CNY product by the PBOC at 6.1494. This saw the off-shore CNH rally 80 points. The move has led to speculation that the PBOC wants to guide the market towards a stronger currency.

 

 

EUR/USD
Supports
 1.0580-1.0435-1.0340 | Resistance 1.0905-1.1045-1.1224

 

 

USD/JPY
Supports  
119.30-118.65-116.70 | Resistance 121.55-123.70-123.70

 

 

GBP/USD
Supports  1.4640-1.4550-1.4350 | Resistance 1.5030-1.5170-1.5250

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