EURUSD Bounces Off Support, USDTRY Rises on RRR Cut

2019-02-18 13:31:00 Justin McQueen

MARKET DEVELOPMENT –USD Drops, EUR Bounces Off Support, USDTRY RRR Cut

USD: On this holiday quietened session with US participants away for Presidents Day, the USD has continued its recent shift lower as G10 currencies, with the exception of JPY, gain against the greenback as markets have a more constructive outlook regarding a potential trade agreement between the US and China. Elsewhere, with little in the way of tier 1 data until the latter half of the week, eyes will turn towards Fed speech, alongside the FOMC meeting minutes, which may provide clues in regard to the view on the balance sheet outlook.

EUR: The Euro has been among the notable beneficiaries of this morning’s USD weakness with EURUSD reclaiming a foothold above the 1.13 handle, alongside this, the Euro has also found support amid the tighter DE-IT bond spreads. However, additional concerns may begin to weigh on the Euro after the US Commerce complete their investigation as to whether EU autos pose a threat to national security. While details have yet to be publicly disclose, President Trump will have a 90-day window to decide whether to go ahead with tariffs. As such, headline risk is somewhat elevated.

TRY: The Turkish Lira is the notable underperformer in the EM space after the Turkish Central Bank lowered Lira reserve requirements by 100bps, which in turn is expected to increase liquidity by 3.3bln Liras. Consequently, this has dampened the perception that the central bank will maintain a tightening bias ahead of next month’s rate decision, thus seeing the Turkish Lira weaker across the board.