Bounceback Friday in FX

Market Drivers May 19, 2017
Cable rebounds to 1.3000
EUR trades near short term highs
Nikkei 0.19% Dax 0.30%
Oil $49/bbl
Gold $1250/oz.

Europe and Asia:
NZD CC Spending 6.4% vs. 7.2%
EUR CA 34B vs. 32B

North America:
CAD CPI 8:30
CAD Retail Sales 8:30

After a very volatile session yesterday that saw a mini flash crash in the pound, trading in the currency market was decidedly more orderly today with most of the majors recovering their losses and cable retaking the key 1.3000 level by mid-morning London trade.

Yesterday’s flash crash in the pound still remains a mystery with fake news from zerohedge cited as one possible reason. (The website posted a video that claimed James Comey admitted under oath that he knew of no interference in Russia probe. But the video was taken out of context as Mr. Comey was specifically referring to DOJ rather than the White House).

In either case, currencies stabilized and rallied against the buck once again with risk flows seemingly the prime driver today. Both EUR/USD and GBP/USD were well bid and USDJPY traded back above 111.50 suggesting that FX traders were taking their cues from the equity markets.

With no major economic events in Asia or Europe, there was no newsflow to move markets and the North American session is barren as well with only Canadian data on the docket. In Canada, the market will get a look at the CPI data and Retail Sales both of which are expected to rebound. The loonie appears to have found a near-term bottom as oil prices have stabilized near the $49/bbl rate and could now make a ran towards the 1.3500 level if the data proves to be supportive.

As to the greenback, the single currency remains under pressure but mainly from political rather economic risk. Every day this week the market has seen news bombs out of Washington as the investigation into the Trump administration generated one sensational claim after next. With the President scheduled to leave for his trip overseas and with no further action from Congress until next week, the markets may finally see a no-drama day. If risk appetite remains positive both euro and sterling could extend their gains, but given the situation in Washington, any exogenous could upend the market once again.

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