The British Pound (GBP) strengthens against the Japanese Yen (JPY) on Monday, with GBP/JPY extending its rally for a sixth consecutive day as rising Oil prices continue to weigh on the Yen. At the time of writing, the cross is trading around 214.87, its highest level since February 4.
Scotiabank strategists Shaun Osborne and Eric Theoret note the US Dollar (USD) is firmer after President Trump announced a blockade of Iranian ports, with US Dollar Index (DXY) off its Asian highs and still seen within a broader bearish setup.
OCBC strategists Sim Moh Siong and Christopher Wong highlight that recent New Zealand Dollar (NZD) gains on hawkish Reserve Bank of New Zealand (RBNZ) rhetoric look vulnerable. Markets now price nearly three hikes by year-end despite New Zealand’s negative output gap and below-trend growth.
Standard Chartered’s Bader Al Sarraf highlights that the Strait of Hormuz has been effectively shut since late February, driving a sharp drop in Gulf crude exports and taking a large volume of production offline.
Rabobank’s Senior FX Strategist Jane Foley observes that speculators have been rebuilding long Dollar positions as the US currency acts as the preferred safe haven during the Middle East conflict.
Societe Generale economists highlight that Euro area activity data in Q1 have been somewhat disappointing, especially German industry, but they see limited upside risk to their cautious 0.1% qoq German GDP forecast.
Deutsche Bank economists note the European Central Bank (ECB) kept rates unchanged in March but now expects two 25 bp hikes in June and September, already fully priced by markets. The deposit rate sits at 2.0%, seen as neutral.
ING economists Peter Virovacz and Frantisek Taborsky say Hungary’s new Tisza-led supermajority reduces short-term policy uncertainty and raises expectations for institutional repair, EU relations and fiscal credibility.
United States Existing Home Sales (MoM) below forecasts (4.06M) in March: Actual (3.98M)
United States Existing Home Sales Change (MoM) down to -3.6% in March from previous 1.7%
HSBC's report on G8 currencies argues that Middle East geopolitics and Oil remain the dominant drivers for the Dollar and major FX. The bank highlights a recently strengthened USD–Oil correlation driven by supply shock and safe-haven flows.
NZD/USD moves lower at the start of the week and trades around 0.5830 on Monday at the time of writing, down 0.15% on the day after the failure of negotiations between the United States (US) and Iran over the weekend.
