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

Daily FX Report

Read disclaimer

EUR / USD

The Euro maintained a firm tone ahead of the New York open as firm risk conditions undermined demand for the US currency. The single currency strengthened to highs just below 1.1900, but was unable to make a challenge on this level, especially with disagreement over the EU budget hampering sentiment.

US retail sales increased 0.3% for October following a downwardly-revised increase of 1.6% for September and slightly below consensus forecasts of 0.5%. Underlying sales also missed estimates with a 0.2% increase while the control group increase was held to 0.1% for the month following a 0.9% gain the previous month.

Industrial production increased 1.1% for October after a 0.4% decline the previous month and slightly above consensus forecasts.

Elsewhere, the NAHB housing index strengthened to a record high of 90 from 85 previously as the very low level of interest rates continued to spur demand in the housing sector. Import prices declined 0.1% on the month with a 1.0% year-on-year decline.

Fed Chair Powell stated that the economic recovery has significant downside risks in the short term. He reiterated that the central bank would use all tools to support the economy. He reiterated that the economy also needed additional fiscal support and very low yields continued to curb US currency support.

The dollar was unable to gain any traction, especially after the downbeat comments from Powell, although the Euro drifted lower towards 1.1860 at the European close. The US currency overall was unable to gain territory on Wednesday with the Euro around 1.1875. 

JPY

There was a further degree of optimism over the 2021 global outlook which tended to undermine potential dollar demand. From a shorter-term perspective, there were increased reservations over the US outlook as coronavirus cases continue to increase. Unease over the US economic outlook could be offset by a fresh bout of defensive demand if equity markets slide. The dollar was unable to gain any support and retreated to lows near 104.10 against the Japanese currency

Majority leader McConnell stated that the Senate still wants to pass more covid aid, but there are no signs of serious talks. The Senate blocked the nomination of Shelton as a Federal Reserve Governor, although the Republicans will look to bring the vote back to Congress later this month.

Equities drifted lower on Wednesday as unease over short-term economic developments offset longer-term optimism. The Chinese yuan maintained a strong tone close to 29-month highs with the dollar dipping to test support just below 104.00 as the yen maintained a strong tone on the crosses. 

GBP

In comments on Tuesday, Bank of England Governor Bailey stated that quantitative easing in a time like this can prevent an unwarranted tightening of financial conditions. As far as the economy is concerned, he noted that there is now some light at the end of the tunnel, but here is no room for complacency.

There were source reports that a Brexit trade deal could be reached by early next week, although there was still a high degree of uncertainty over the outlook. EU Chief Negotiator Barnier is expected to brief EU Ambassadors on Friday and there was also speculation of further delays. In this context, there will be pressure for some measures to alleviate border stresses from January 2021. Political rhetoric will continue to be watched very closely.

Sterling gained an element of support from expectations of a strong global rebound in 2021 which would tend to benefit the UK economy and currency.

Bank of England Deputy Governor Ramsden stated that the bank stood ready to take whatever additional action is necessary to reach the 2% inflation target.

Sterling settled just above 1.3250 against the dollar with the Euro weakening to near 0.8950. There were some reports that France had made concessions on fishing which helped underpin Sterling sentiment on Wednesday and the UK currency held just above 1.3250 against the dollar in early Europe. The UK CPI inflation rate increased to 0.7% from 0.5% with the underlying rate at 1.5% from 1.3% with the Euro just above 0.8950 as political developments dominated. 

CHF

The Swiss franc was held in narrow ranges on Tuesday with a lack of fresh incentives. The Euro edged above 1.0800, but struggled to make any significant headway while the dollar dipped below 0.9100 before finding some support.

Switzerland reported that ICU hospital bed capacity was at 100%, maintaining concerns over domestic coronavirus developments. The Swiss currency maintained a firm tone, however, amid a reluctance to send capital overseas. The Euro traded just above 1.0800 while the dollar was pinned just above 0.9100.

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.

Quarterly Metals Report – Q4 2020

Our analysts provide fundamental and technical analysis and forecasts for base and precious metals, iron ore and steel. We assess how COVID-19 has impacted the metals market and outline what data points to look at to help navigate the next few months in the market.