FX round-up: Russia and China weigh in to help diffuse North Pacific tensions

Digital Look Sharecast | 11 Aug, 2017 17:45 - Updated: 17:46 | | |

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Day three of the sabre-rattling between the US and North Korea have again benefited safe haven currencies, although to a lesser degree.

Talks were held on Friday between Russia and China aimed at diffusing tensions in the North Pacific which has helped to calm matters somewhat. German chancellor Angela Merkel has also weighed in stating, "an escalation of the rhetoric is the wrong answer," adding "I see the need for enduring work at the U.N. Security Council [...] as well as tight cooperation between the countries involved, especially the U.S. and China."

Negative US data releases added to the pressure on the US dollar on Friday, with CPI and core CPI both coming in at 0.1%, below market expectations of 0.2%.

The less than favourable inflation figures throw more cold water on any expectations of a rate hike in the US this year and weighed on the dollar index to take it lower by 0.16% at 1600 BST, to 93.248 slipping to a one week low.

USD/JPY lost further ground on the back of the bad figures and continued safe haven purchasing of the Japanese yen, taking the pair 0.16% lower to 109.03.

Currently sitting on a support area, marking the neckline of a double top formation on the daily timeframe, the pair is poised to make significant moves in either direction.

For the Swiss franc, the price action seen today was similar to USD/JPY, with the pair relatively unchanged on the day at 0.9621, down only 0.06%.

Sterling was fairly flat against the dollar on Friday with support in the 1.2952 area intact, despite negative CPI figures from the US, this area seemed remarkably strong with possible bids lying in wait. By the London close, the pair was down only 0.02% to trade at 1.2973.

GBP/USD currently sits at near a three week low as the outlook for the UK economy grows cloudy following a week of mixed results. Speaking on the recent sentiment surrounding the pound, FX strategist Viraj Patel of ING said, "The July bounce in sterling was on some expectations that the Bank of England will increase interest rates at its last policy meeting, but with fundamentals looking increasingly downbeat for the economy, it seems to be a path of gradual weakness for sterling."

Against the euro, sterling did not fair so well either, trading lower 0.22% lower on the day to 1.1000.

The euro faired a bit better against the dollar on Friday, which could have been due to a slight increase in risk appetite, but most likely due to the worse than expected CPI figures from the US, to trade 0.23% higher to 1.1798.

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