1. FX Outlook
  2. Daily FX Report



The Euro posted strong gains after Tuesday’s European open with a surge to above 1.0400 against the dollar. The German ZEW economic sentiment index recovered strongly to -38.7 for November from -59.7 the previous month and stronger than consensus forecasts of -52.0. The current conditions index recorded a more modest improvement to -64.5 from -72.2 and above expectations of -68.4. Euro-Zone GDP was confirmed at 0.2% for the third quarter with a 2.1% year-on-year increase.

US producer prices increased 0.2% for October, below consensus forecasts of 0.4% with the year-on-year rate declining to 8.0% from 8.4%. Core prices were unchanged with the year-on-year increase slowing to 6.7% from 7.1% and below expectations of 7.2%, reinforcing optimism that underlying inflation was moderating.

The New York Empire manufacturing index rebounded to 4.5 for November from -9.1 the previous month and well above expectations of -5.0.  Shipments also increased on the month, but there was a dip in new orders into contraction territory while unfilled orders also declined.

Employment increased on the month and there was a net strengthening of price pressures compared with the previous release.

The dollar dipped sharply in immediate response to the PPI data with the Euro jumping to 4-month highs around 1.0480, but there was a quick reversal to near 1.0400.

The dollar regained some ground after the European close and the Euro slumped to lows below 1.0300 following reports that a Russian missile had landed in Poland and killed two people. There was further choppy trading with the Euro recovering to 1.0370 on Wednesday as geo-political fears eased following reports that the missile may have been fired by Ukraine in an attempt to intercept a Russian missile. There is liable to be further choppy trading during Wednesday.




There was choppy trading in Treasuries after the US data releases with the 10-year yield dipping to 3.78% before a quick rebound to above 3.80%. The dollar slumped to lows around 137.70 amid wider selling before a quick recovery to above 139.00 while volatility remained elevated later in the session.

Philadelphia Fed President Harker stated that he didn’t want to raise interest rates way up and then way down again.

Atlanta Head Bostic stated that the full impact of monetary policy won’t be felt for months and that the central bank must look to economic signals other than inflation as guideposts. He added that there are glimmers of hope on goods inflation, but services-sector inflation needs to slow as well and he sees upward pressure on wages. He still considered that further rate hikes will be needed and Treasuries were unable to make any significant headway.

Japanese machinery orders data was very weak with a core 4.6% decline after a 5.8% slide the previous month.

Risk appetite recovered later in the Asian session with US futures in positive territory and the dollar strengthened to 140.30 before a retreat to just below 140.00.




After the latest UK jobs data at the European, there were no major domestic developments during the day, but Sterling was subjected to high volatility. The UK currency posted strong gains after the European open with a move to just above 1.19 against the dollar. Sterling spiked to 3-month highs above 1.2000 after the US open amid a wider dollar slide and jump in short covering before a rapid reversal to the 1.1900 area with strong selling interest around 1.2000.

Sterling was undermined by reports that Russian missiles landed in Poland and dipped sharply to lows around 1.1800 before a recovery to around 1.1875 amid choppy trading in equities. The Euro tested the 0.8800 level before a slide to 0.8720 in very choppy trading and recovered to 0.8760 on Wednesday. 

The headline UK CPI inflation rate increased sharply to 11.1% from 10.1% and above expectations of 10.7% as higher energy prices had an important impact. The core rate was unchanged at 6.5% and marginally above expectations of 6.4%. Sterling spiked on the data, but failed to hold the gains and traded around 1.1850 against the dollar as confidence in the UK outlook deteriorated. If the Bank of England is forced to take more aggressive action, there will be concerns over a deeper recession.




Swiss National Bank Chair Jordan stated that inflation is a thorny issue and there is still a risk that it will increase further. He added that monetary policy is still expansionary and will most likely have to adjust policy again, reinforcing expectations of a further December rate hike.

There was high volatility in the franc during the day with the Euro surging to highs around 0.9840 before a rapid retreat to 0.9730 while the dollar dipped sharply to lows at 0.9360 before a strong recovery to 0.9450. The franc lost some ground on Wednesday as geo-political tensions eased with the dollar around 0.9440.


Technical Levels 

161122 Tech




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