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

Daily FX Report

Read disclaimer

EUR / USD

The Euro briefly moved higher in early European trading on Tuesday, although it was unable to sustain the gains and retreated back below the 1.2150 level as the dollar continued to secure buying support on dips. The Euro was also undermined by reported comments from German Chancellor Merkel that the current lockdown measures were likely to stay in place until early April. In this context, there will be further concerns over near-term developments within the Euro-zone economy.
The US NFIB small-business confidence index declined sharply to 95.9 for December from 101.4 previously and well below consensus forecasts of 100.0.
The JOLTS job-openings data recorded a small decline to 6.53mn from 6.63mn the previous month, although slightly above market expectations. The IBD consumer confidence index strengthened to 50.1 from 49.0 previously with little overall market impact.
Cleveland Fed President Mester stated that monetary policy will not need to change as long as the medium-term outlook remains intact even though downside risks have lessened slightly. Kansas City head George stated that the Fed won’t react to any inflation move above 2.0%. The latest CPI data is due for release on Wednesday, although the second-quarter data will be important given that inflation will be pushed higher by a base effect of price declines in the second quarter of 2020.
The dollar was unable to gain fresh traction in New York and the Euro rallied to 1.2170 at the European close.
The US currency continued to wilt later in the day with the Euro breaking above the 1.2200 level while commodity currencies strengthened. There was little overall change on Wednesday with the dollar looking to stabilise, but unable to make headway as overall confidence dipped again with the Euro holding above 1.2200.

JPY

China’s M2 money supply growth slowed to 10.1% for December from 10.7% previously while there was a slowdown in new lending to CNY1260bn from CNY1430bn previously, although this was slightly above consensus forecasts. Near-term Chinese data will be prone to volatility surrounding the Asian new-year holidays.
The US 10-year bond yield edged higher to fresh 10-month highs in early New York, although the US currency was unable to secure fresh support and drifted lower. Wider losses pushed the US currency below 104.00 later in New York and US bond yields moved lower which also tended to curb US currency support.
Vice-President Pence will not invoke the 25th amendment to remove Trump from office and the House is due to vote on impeachment later on Wednesday with evidence that Thump support is weakening. Fiscal and monetary policy developments will be potentially important with Fed Chair Powell speech due to speak on Thursday while President-elect Biden is due to announce his fiscal policy plans and there will be a significant impact on yields.
The Chinese yuan strengthened on Wednesday and the dollar remained on the defensive with a retreat to lows near 103.50 before a slight correction.

GBP

In comments on Tuesday, Bank of England Governor Bailey stated that negative interest rates were a controversial issue and that there are a lot of issues with the transmission of rates dependent on the banking sector. Bailey pointed to near-term downside risks, but was still confident that long-term scarring will be contained and that there will be a strong recovery later in the year. Overall, Bailey’s comments were seen as lessening the potential for negative rates which supported Sterling as markets moved to price out any move until late this year compared with last week when futures were pricing in a move by May.
Despite near-term fears over the outlook, optimism over vaccine developments also helped underpin the UK currency and there was some optimism that the rate of growth in new cases was slowing. Sterling moved back above 1.2600 against the dollar while the Euro weakened to 5-week lows around 0.8930.
As the dollar lost ground, there were further notable gains to above 1.3650 against the US currency. Sterling held a firm tone on Wednesday with a peak close to 32-month highs and near the important 1.3700 area against the dollar and before a slight correction while the Euro edged lower to 6-week lows around 0.8925.

CHF

The Swiss franc edged lower on Tuesday, although overall ranges were narrow with the Euro settling around 1.0820 as the domestic currency continued to resist sustained selling pressure. The dollar hit further selling interest above the 0.8900 level and closed just below this level at the European close.
Optimism over a global recovery later this year curbed franc support to some extent, although moves were still relatively limited. There was little change on Wednesday with the dollar retreating to near 0.8850 amid wider losses while near-term euro-zone coronavirus developments provided some protection.

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 July 2021

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs. Cryptocurrencies are the focus of this month's FX Monthly report. The report includes a macroeconomic overview as well as desk comments and technical analysis on key currency pairs.

Quarterly Metals Report – Q3 2021

COVID cases are rising across the globe as the delta variant spreads, this is causing some nervousness in financial markets, especially with the higher inflation rhetoric. Commodity prices have fallen since the Fed changed their tune inflation, the dollar has stabilised which has also been a headwind to prices. The summer months are traditionally quieter for metals demand which could prompt metals to consolidate. If the delta variant continues to spread, we may see higher levels of stimulus for longer. As things stand stimulus levels are set to be tapered and this could be brought forward if inflation remains high. We expect markets to remain volatile but on lower volume through the summer months.