1. Reports
  2. Daily FX Report
Non-independent Research

Daily FX Report

Read disclaimer

EUR / USD

 

The Euro-zone manufacturing PMI index was revised higher to 54.8 for the final October reading from 54.4 in the flash reading with the Spanish and Italian indices also beating consensus forecasts on the month. The data provided only limited relief given difficulties within the services sector. There were further important concerns surrounding Euro-zone coronavirus developments with Italy announcing that it would introduce a 3-tier system in an attempt to curb the increase in cases.

The Euro overall remained on the defensive amid unease over the recovery outlook and expectations of further ECB easing. Although equities strengthened on the day, and the Chinese yuan held firm, the single currency was unable to make headway with a peak just above 1.1650 against the US dollar.

The US ISM manufacturing index strengthened to 59.3 for October from 55.4 previously and above consensus forecasts of 55.8. There was a notably strong reading for new orders with production growth also firmer on the month while employment moved back into positive territory.

Markets are not expecting significant policy moves at Wednesday’s Federal Reserve policy meeting, although any rhetoric surrounding yields will be watched closely.

The dollar overall posted 1-month highs on the day and expected volatilities increased to the highest level since April and the Euro drifted weaker.

There will inevitably be caution on Tuesday with markets waiting for the US election results. The US currency overall held a firm tone in early Europe with a reluctance to engage in aggressive positions, although the Euro edged above 4-week lows and traded just above 1.1650 at the European open.

 

JPY

There were underlying concerns surrounding tensions during election night and a contested result with reports that President Trump would declare victory if he was ahead on Tuesday night UK time even if there were expectations that the counting of postal votes would favour the Democrats.

National opinion polls suggested a slight narrowing of Biden’s lead, although there was still a comfortable lead. State polls indicated enough support for a Biden victory, although there was evidence that there had been a tightening in the last few days and many leads were within the margin of error.

US equities made solid gains during the day and US yields also moved higher with the dollar making limited net gains, although it was held below the 105.00 level. Markets continued to fret over the risk of delayed election results and prolonged uncertainty, especially given disputes over postal voting. There is also liable to be a delay in knowing the Senate outcome. The dollar edged lower on Tuesday as US equities held firm with the dollar around 104.70. There will inevitably be a high degree of volatility during the Asian session on Wednesday with the yuan likely to weaken sharply if Biden loses with defensive yen support if equities slide.

 

GBP

The UK PMI manufacturing index was revised higher to 53.7 from 53.3 recorded in the flash reading, but the economic data had little overall impact, especially with a focus on coronavirus developments. There were increased expectations that the economy would contract for the fourth quarter.

In the House of Commons, UK Prime Minister defended the new lockdown for England and also announced that economic support for the self-employed would be doubled at a cost of £4.5bn. There was significant opposition within the Conservative Party, although the lockdown will be approved.

Overall confidence in Sterling remained weak, especially with increased expectations of GDP contraction for the fourth quarter. The lockdown measures and increased financial support will also put further upward pressure on the budget deficit. The potential for Sterling selling was limited by hopes that negotiators would be able to secure a Brexit trade deal within the first half of November. An official update is expected within the next two days.

The UK currency dipped to lows near 1.2850 against the dollar before moving back above 1.2900 while the Euro settled around 0.9015 after hitting resistance close to 0.9050. Sterling edged higher on Wednesday with markets monitoring political developments and overall volatility is liable to be high.

 

CHF

 

The Swiss PMI manufacturing index declined to 52.3 for October from 53.1 previously and below consensus forecasts. Swiss sight deposits increased to CHF707.6bn for the latest week from CHF706.9bn the previous week which suggested that there was only limited National Bank intervention during the week.

The Swiss franc lost ground on Monday amid the net improvement in risk appetite with the Euro advancing to the 1.0700 area and the dollar strengthened to 2-month highs of 0.9200. The franc was little changed on Wednesday as equity markets held firm with the dollar edging lower.

 

Contents

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

Sign-up to get the latest Non-independent research

We will email you each time a new report has been published.

You might also be interested in...

Daily Report Base Metals

Daily market commentary on LME aluminium, copper, lead, nickel, tin and zinc.

Daily Report Softs Technical Charts

Technical analysis and charts for the key sugar, cocoa and coffee contracts.

Weekly Report FX Options

Commentary and analysis covering OTC currency option pricing, volatility and positioning.

FX Monthly Report December 2021

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs. This month we focus on China, highlighting the fundamentals for the macroeconomy, as well as any changes to the PBOC in the coming months. The recent cut in the risk reserve requirement suggests monetary loosening. We also outline the movement between the onshore and offshore currency for those looking to arbitrage or hedge their exposure. This analysis gives an indication of the average width of the spread what key levels to look out for.

Quarterly Metals Report – Q4 2021

The global macro picture is starting to present some downside risks in the near term as China's economy is set to slow further and supply-chain bottlenecks continue to cap growth. New orders and new export orders in China are contractionary, and we expect demand in Q4. Order backlogs and lead times for products will continue in Q4, limiting growth, and real consumption is weaker than it looks. Higher costs from shipping, raw materials and energy will take their toll on the consumer, and we expect end-user demand to suffer. The final piece of the jigsaw is the reduction in stimulus from central banks and how that will impact financial markets, bond yields, and the dollar has rallied while stocks corrected, but what will this trend continue?