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

Daily FX Report

Read disclaimer

EUR / USD

The Euro maintained a firm tone in early Europe on Tuesday and edged higher against the weak US dollar. The single currency peaked at 1.2180 before being subjected to a correction as market adopted a more cautious stance ahead of the Fed Powell’s testimony, especially with equities moving significantly lower.
US consumer confidence strengthened to 91.3 for February from a revised 88.9 the previous month and above consensus forecasts of 90.0. Although there was a slight decline in the expectations index, this was offset by a significant gain for the current conditions component.
Fed Chair Powell stated that the economic recovery remains uneven and far from complete while the path ahead remains highly uncertain. Powell added that it is likely to take some time for substantial progress on the Fed goals to be achieved and that the FOMC committee will clearly communicate well in advance of any change in the bond-buying pace. He was optimistic that there would be a strong second half recovery in the economy.
He added that the inflation rate remains below the 2% longer-run objective and the pandemic has had a significant imprint on inflation with prices particularly soft in sectors most affected by the pandemic. He also considered that it was unlikely that an increase in spending would lead to high inflation.
The dollar retreated again to 6-week lows following Powell’s comments with the Euro settling around 1.2150. The Euro was hampered on the crosses by reports that there will be a further shortfall in Astra Zeneca second-quarter Euro-zone vaccine supplies to the EU and was held just above 1.2150 in early Europe on Wednesday.

JPY

The dollar pushed to highs at 105.40 in Europe on Tuesday, but was unable to sustain the gains and gradually lost ground as the decline in equity markets curbed potential selling interest on the Japanese currency as markets continued to monitor developments in bond markets.
The US Richmond Fed manufacturing index was unchanged at 14 for February with a slight slowdown in the growth of new orders. There was a further solid increase in employment while prices increased sharply with the sharpest increase in the prices paid index for close to two years. The Philly Fed non-manufacturing index improved sharply to 3.9 for February from -17.5 previously which suggests that there was a notable improvement in services, although employment growth remained weak.
There was support below 105.00 with a slight recovery into the European close as the US currency attempted to stabilise. The yen was also hampered by an underlying lack of support for low-yield instruments. As Wall Street equities recovered, the dollar edged higher to the 105.25 area.
The House of Representatives will vote on the $1.9trn fiscal support package on Friday, but US equity futures lost ground lower in Asia. The yen lost ground as overall support for defensive currencies remained weak with the dollar nudging higher to just above the 105.50 level.

GBP

The CBI retail sales index improved marginally to -45 for February from -50 previously, but this was weaker than consensus forecasts of -38. Retailers were also pessimistic over the short term outlook with the expected reading for March at -62 as the closure of non-essential retail continued to undermine activity.
Prime Minister Johnson was optimistic that there would be a full re-opening of the economy on June 21st and underlying Sterling sentiment remained strong despite fragile fundamentals. There were expectations that the UK economy would recover faster than the EU. The UK currency strengthened to fresh 34-month highs above 1.4100 while the Euro weakened to fresh 11-month lows near the 0.8600 level. Sterling also posted a strong advance against the Swiss franc.
There were reports that Chancellor Sunak would extend the stamp duty holiday to the end of June and extend the furlough programme in next week’s budget. Sterling spiked higher in Asia on Wednesday with reports of stop-loss buying and option-related buying. The UK currency surged to 35-month highs above 1.4230 against the dollar before a retreat to just below 1.4200 with the Euro sliding to 1-year lows below 0.8550 before a limited correction amid strong underlying Pound demand.

CHF

The Swiss franc weakened significantly in early Europe on Tuesday as expectations of higher global bond yields triggered renewed selling pressure on the domestic currency. The Euro jumped to highs around 1.0950 before stabilising into the New York open.
There was further selling in New York with the Euro strengthening to test the 1.1000 area. The dollar also posted significant net gains to just above 0.9050 despite US vulnerability. The Swiss franc continued to lose ground on Wednesday with the Euro at 11-week highs around 1.1020 with the dollar at 10-week highs around 0.9070.

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?