1. FX Outlook
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Euro-Zone M3 money supply growth slowed to 5.1% in the year to October from 6.3% previously which suggests that ECB rate hikes have had some impact in slowing liquidity growth. In testimony on Monday, ECB President Lagarde stated that rates are still in an accommodative range and that there is still upward pressure on inflation. In this context, she added that rate hikes still have a long way to go. According to Lagarde, incoming data suggests upward pressure on wages and the bank will continue to assess the policy implications. ECB member Knot stated that a recession is not a foregone conclusion while underlying inflation trends are worrisome.

There were some concerns that protests in China would trigger renewed stresses in global supply chains which would also risk renewed upward pressure on inflation. These concerns put upward pressure on German yields and helped underpin the Euro in early Europe with the Euro posting 5-month highs just below the 1.0500 level.

The Euro was unable to make a serious challenge on the 1.0500 level and there was a sharp reversal later in the day. There was evidence of month-end corporate dollar buying which underpinned the US currency and stop-loss Euro selling kicked in as the single currency started to lose ground.

In this environment, the Euro sipped sharply to below 1.0400 at the European close and posted further losses to a trough around 1.0335 as equities retreated.

CFTC data recorded a further net increase in dollar shorts to the highest level since July 2021, limiting the potential scope for further US selling.

Risk appetite recovered on Tuesday which helped support the Euro as it strengthened to around 1.0390 against the dollar before a retreat to 1.0360 in choppy trading.




The dollar dipped to 3-month lows near 137.50 after the European open on Monday as the dollar encountered wider selling pressure.

The Dallas Fed manufacturing index recovered slightly to -14.4 for November from -19.4 previously. There was, however, a faster rate of decline in new orders with slower employment growth and an easing in inflation pressures which would support the case for a less aggressive Fed stance.

In a media interview, Cleveland Fed President Mester stated that she did not think that the central bank is near a pause in interest rates with the bank needing to see several more good inflation reports. And more signs of moderation in the economy.

New York Fed President Williams expressed some confidence that there were signs of moderating inflation and supply-chain improvements. He added, however, that inflation risks are still on the upside and also expected that rates would not be cut until 2024. Richmond Fed Barkin stated that interest rates will need to rise further if inflation remains high. Risk appetite deteriorated further, but the dollar was able to make further gains to near 139.00.

During Asian trading on Tuesday, there was fresh speculation that China would announce a move away from the zero-covid policy which had an important impact in boosting risk appetite and the dollar retreated to the 138.50 area amid a wider US currency setback while the yen was broadly resilient in global markets.




Sterling was able to make headway against the dollar in early Europe on Monday, but was unable to make a challenge on highs seen last week and the UK currency also lost ground against the Euro. The latest CBI retail survey recorded a sharp decline to -19 for November from 18 previously and well below consensus forecasts of 2. Retailers also expect that there will be a further decline for the crucial month of December and retailers remain broadly pessimistic over the outlook while price increases were close to the fastest level for 37 years recorded for August. The data maintained reservations surrounding the spending outlook and wider economy.

UK equities were broadly resilient during the day, but overall risk appetite was weaker which undermined potential Sterling support.

There were steady losses against the dollar and a fresh dip in equities triggered a slide through the 1.2000 level with lows at 1.1950. Risk conditions remained a key influence with Sterling recovering to near 1.2000 on Tuesday as sentiment strengthened while the Euro posted a net advance to near 0.8650 before stalling.




Total Swiss sight deposits declined further to CHF555.4bn for the latest week from CHF562.1bn the previous week, maintaining the run of sustained losses seen over the past 2-3 months as the National Bank looks to tighten liquidity in the domestic economy.  

The Euro posted a strong advance in early Europe on Monday and surged to highs above 0.9880 before a fresh reversal to 0.9830. The dollar found support above the 0.9400 level and recovered to 0.9465. The franc lost some ground on Tuesday as equities recovered while the dollar settled around 0.9475.


Technical Levels 

291122 Tech (1)


291122 Cal (1)



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