DAILY CURRENCY UPDATE
14 June 2017
Relief rally in sterling, CAD outperformance on crosses while USD holds steady
GBP: While a formal agreement between Conservatives and DUP
is yet to be reached, GBP manages to gain overnight on Reuters
headlines from the DUP leader that "significant" progress is being
made, with both parties anticipating a deal by Wed/ Thursday.
USD: Meanwhile USD continues to hold its ground against its G3
counterparts (EUR and JPY) on evidence of Republican Senate
progress on healthcare with hints that a consensus seems to be
forming in Washington on Obamacare repeal that could potentially
bring the bill to a vote before the July 4 break.
CAD: Sentiment continues to firm as BoC Governor Poloz
overnight confirms his deputy governor’s hawkish slant the day
before, saying Canadian economic growth is broadening and
gaining momentum and interest rate cuts have "done their job“.
Says people now need to think about how their finances would look
if rates were a" little higher" when they renew their mortgages.
GBPCAD – More room to run on the downside
USD sentiment firmer
as attention returns to
US healthcare
developments and
Fed rates
Page 2
Longer term political
premium yet to be
fully discounted into
sterling despite rising
odds of a deal
Page 2
CAD outperformance
set to continue within
the commodity bloc
and on other selected
crosses
Page 3
SGD potentially
emerging as a more
resilient candidate to
USD amidst the low
yielder EM space
Page 3
Source: CitiFX technicals, June 13, 2017
CURRENCY UPDATE – PAGE 1
INVESTMENT PRODUCTS: NOT A BANK DEPOSIT. NOT GOVERNMENT INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.
DAILY CURRENCY UPDATE
USD & JPY
USD sentiment firmer as attention returns to US healthcare developments and Fed rates
1-Month 1-Month
High
Low
CCY
Spot
USD Index
96.98
99.89
USDJPY
110.06
114.38
Tactical Short Term Bias
(Monthly)
Citi Long Term
Bias (6-12Mths)
Support 2
Support 1
Resistance 1
Resistance 2
96.51
Progress on US healthcare
and higher Fed rates pointing
to a firmer base
Moderately Bullish
95.96
96.52
98.50
99.43
109.11
A buy on dips sentimentg
emerging
Bullish
109.10
109.40
110.82
111.45
Citi Themes & Strategy: Fed FOMC Meeting Thursday but key tier 1 data tonight: • USD: Citi Research: Fed risks lean towards hawkish – Following a likely well telegraphed 25bp
hike tomorrow, interest will shift to changes in Fed projections with some upside risk to dots as
the recent inflation drop is seen as transitory, unemployment forecasts to drop out to 2019
together with further details on balance sheet reduction. Citi Research continues to expect a
further hike in September with a December “pause” to announce balance sheet reduction.
• USD: But before the Fed, tonight sees US May CPI with Citi Research looking for a stronger
0.2%MoM rise in core following a 0.1% rise in April but warning that a print below 0.1% could
have Fed officials reassessing the pace of subsequent rate hikes. May retail sales, also due
tonight is expected to be little changed (0.0%) following April's healthy 0.4% gain though the
control group (ex volatile components) likely posted a modest 0.3% gain. With the more positive
headlines on healthcare coupled with the prospect of a more hawkish leaning Fed, the USD
Index (DXY) is now seen solidly supported around 96.20 – 70 though it is probably too early to
expect a significant and sustained lift in USD yet.
Euro Bloc
Longer term political premium yet to be fully discounted into sterling despite rising odds of a deal
1-Month 1-Month
High
Low
Tactical Short Term Bias
(Monthly)
Citi Long Term
Bias (6-12Mths)
Support 2
Support 1
Resistance 1
Resistance 2
1.0839
1.1300 posing a firmer cap
Moderately Bearish
1.1110
1.1160
1.1232
1.1285
0.8384
A buy on dips targeting 0.90+
Mildly Bearish
0.8740
0.8780
0.8850
0.8900
125.82
122.56
122.50
123.80
124.00
1.3049
1.2635
Moderately Bullish
Well Supported
Around 1.2600
122.00
1.2745
Biased towards higher levels
Targeting the low 1.20s on
longer term political risk
1.2580
1.2640
1.2780
1.2850
0.9686
1.0105
0.9595
Biased towards higher levels
Mildly Bearish CHF
0.9600
0.9650
0.9730
0.9815
CCY
Spot
EURUSD
1.1213
1.1323
EURGBP
0.8798
0.8870
EURJPY
123.41
GBPUSD
USDCHF
Key Data: ZEW confirms prospects for solid German growth; UK CPI almost hits 3%: • EUR: Headline June German ZEW survey current conditions index strengthens to 88.0 vs 85.0
consensus and 83.9 prior but expectations slip to 18.6 vs 21.7 consensus and 20.6 prior though
ZEW remains positive on prospects for German growth for the next six months.
• GBP: 3% CPI in sight with a surprise jump in UK CPI in May from 2.7% YY in April to 2.9% YY
in May (consensus 2.7%) and core rising from 2.4% YY to 2.6% YY. Citi Research sees upside
risks to headline CPI by an additional 0.5% over the next 3 years to peak at 3.4% in 2Q 2018.
Strategy: GBP remains a sell on rallies despite rising odds of a political deal this week:–
• GBP: Moves higher overnight on cautious optimism about the political front and higher than
expected CPI. The current crisis is also leading to hopes for a softer Brexit as PM May is forced
to compromise and this combination of stronger UK fundamentals, a return to some form of
political normality, even transitory and hopes for a softer Brexit should prevent the bottom falling
out of sterling. Yet, heightened political risk is the new norm given a minority government and
sterling should be seen as a sell on rallies with 1.2900 – 1.3000 in GBPUSD and 0.8700- 50 in
EURGBP seen providing selling opportunities towards 1.2300-2350 and 0.9060 respectively.
CURRENCY UPDATE – PAGE 2
All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our
expectations due to a variety of economic, market and other factors. Likewise, past performance is no guarantee of future results.
DAILY CURRENCY UPDATE
Commodity Bloc
CAD outperformance set to continue within the commodity bloc and on other selected crosses
1-Month 1-Month
High
Low
CCY
Spot
AUDUSD
0.7538
0.7568
0.7329
AUDJPY
82.96
84.52
81.77
NZDUSD
0.7217
0.7229
USDCAD
1.3229
1.3794
Tactical Short Term Bias
(Monthly)
Citi Long Term
Bias (6-12Mths)
Already struggling around the
Moderately Bearish
0.7550 area
Neutral
Moderarately Bullish
Outperforming AUD but neutral
0.6818
Mildly Bearish
versus USD
Possibly some further
1.3212
downside and a clear
Mildly CAD Bearish
outperformer on crosses
Support 2
Support 1 Resistance 1 Resistance 2
0.7455
0.7500
0.7570
0.7615
82.00
82.50
83.30
83.45
0.7110
0.7150
0.7250
0.7335
1.3100
1.3212
1.3320
1.3430
Strategy: BoC’s Poloz confirms his deputy’s hawkish slant, CAD seen gaining further on crosses: • CAD: BoC Governor Poloz - sees Canadian economic growth broadening and gaining
momentum and while that doesn't warrant "throwing a party yet," it does suggest that interest
rate cuts have "done their job" and individuals need to be thinking about how their finances
would look if rates were a" little higher" when they renew their mortgages. The comments are
surprising but represent a definite shift in stance to more hawkish slant and a BoC hike this year
now is perhaps not as out of the question as earlier thought (market probability around 30%).
• CAD: USDCAD has once again reacted to the headlines dropping to a 1.3212 low overnight and
traders see room for more, especially given the expected draws in crude expected later this
week. Our CitiFX Technicals team agrees and sees initial support coming in around 1.3212-24
though a bullish CAD view remains better expressed on AUD, JPY and GBP crosses. The
GBPCAD cross in particular has seen good downside follow through with supports including the
short-term rising trend line and the March high having been taken out on a closing basis that
potentially targets the 1.6150-1.62 area (trend line across the lows and lows from February) as
the BoC’s July 12th meeting is now in focus for a possible change to its bias.
• NZD: NZDUSD also continues its inexorable march higher, helped by the surge in CAD and
ahead of tomorrow’s Q1 GDP print which may provide another catalyst for a leg up – charts
potentially indicate that a move higher may be due, based on the technical setup.
Asian EM
SGD potentially emerging as a more resilient candidate to USD amidst the low yielder EM space
1-Month 1-Month
High
Low
CCY
Spot
USDSGD
1.3816
1.4129
1.3784
USDCNY
6.7917
6.9083
6.7748
Tactical Short Term Bias
(Monthly)
A return to buy on dips - but
gains likely moderate
Likely having seen the lows
already
Citi Long Term Lower End
Mid-Band
Bias (6-12Mths)
Of Band
Bearish SGD sub
1.3589
1.3860
1.4000
Moderately Bearish
6.6595
6.7954
CNY
Higher End
Of Band
1.4143
6.9313
Strategy: Positive revisions to Singapore’s Q1 jobs data but still weak overall: • SGD: Singapore’s headline unemployment rate is revised down from preliminary estimates to
2.2% (prelim 2.3%) though with the job vacancies to job seekers ratio rising for the first time in
10 quarters. Q2 preliminary jobs data and inflation expectations need to be watched and any
improvements going forward could challenge the MAS’s view of muted demand inflation
pressures and make the October meeting a closer call than priced in by markets.
CURRENCY UPDATE – PAGE 3
All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our
expectations due to a variety of economic, market and other factors. Likewise, past performance is no guarantee of future results.
DAILY CURRENCY UPDATE
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CURRENCY UPDATE – PAGE 4
All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our
expectations due to a variety of economic, market and other factors. Likewise, past performance is no guarantee of future results.
DAILY CURRENCY UPDATE
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CURRENCY UPDATE – PAGE 5
All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our
expectations due to a variety of economic, market and other factors. Likewise, past performance is no guarantee of future results.