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

Daily FX Report

Read disclaimer

EUR / USD

 

The final reading for the Euro-Zone PMI manufacturing index was revised higher to 63.1 from 62.8 in the flash reading with a notably strong reading for the Italian index on the month. German unemployment declined 15,000 for May following an 8,000 increase the previous month and a slightly larger than expected decline. The data maintained confidence in the Euro-zone outlook, although the Euro was unable to make further headway after the European open.

The Euro-zone CPI inflation rate strengthened to 2.0% for May from 1.6% previously, the highest rate since November 2018 and above market expectations of 1.9% while the core rate increased to 0.9% from 0.8%. There will be tensions ahead of next week’s ECB policy meeting which curbed activity.

The dollar was unable to secure a significant recovery and tended to drift lower again into the New York open as markets monitored inflation developments.

The US ISM manufacturing index strengthened to 61.2 for May from 60.7 previously and slightly above consensus forecasts.  New orders increased at a faster pace, although there was a slowdown in production growth. There were further major supply difficulties during the month while the rate of employment growth slowed sharply. Prices increased at a slightly slower rate on the month, although overall cost pressures remained close to record highs.

The dollar initially edged lower following the release with concerns over the jobs data ahead of key data later in the week, although the Euro hit selling interest above 1.2250. The US currency stabilised later in the day with the Euro settling around 1.2225 amid some reluctance to sell the dollar aggressively given Federal Reserve policy uncertainty. The dollar held a slightly firmer tone on Wednesday with the Euro around 1.2215 as overall reflation traded faded to some extent.

 

JPY

 

The US dollar was unable to make headway into Tuesday’s New York open despite weak underlying yen sentiment. Although US yields edged higher after the US data, the US currency was unable to make headway and traded below the 109.50 level against the Japanese currency.

Markets continued to monitor inflation and Fed rhetoric closely. Fed Governor Brainard stated that the bank is still far from its goals, but seeing progress. She added that inflation and employment data reflect a temporary misalignment of supply and demand and also noted that she would be watching inflation data exceptionally closely.

Treasuries were little changed on Wednesday with US equities slightly lower. Markets continued to monitor Chinese yuan trends closely given the potential importance for global currency markets. Overall yen sentiment remained weak with the economy still being hit by coronavirus developments with a lack of mobility. The dollar posted a net advance to the 109.75 area in early Europe on Wednesday with the Euro close to 134.0.  

 

GBP

 

In comments on Tuesday, Bank of England Deputy Governor Ramsden stated that there was a risk that demand would get ahead of supply in the short term which could push prices higher. He also stated that the bank would not be complacent over prices. The rhetoric maintained speculation that the Bank of England would adopt a more hawkish policy stance over the next few months which provided initial Sterling support.

The final UK PMI manufacturing index was revised down to 65.6 from the flash reading of 66.1. There was a strong increase in new orders while employment increased at the fastest pace on record. Costs and selling prices both increased at the fastest pace on record while capacity constraints also increased.

After pushing sharply higher in early Europe, Sterling was unable to make further headway and posted significant losses into the New York open with further notable selling on approach to 3-year highs near 1.4250 against the dollar. There were no substantive comments on monetary policy from Bank of England Governor Bailey.

The UK currency dipped to lows near 1.4150 late in the European session while the Euro posted net gains to 0.8635. Sterling was unable to regain ground on Wednesday amid slightly more cautious risk conditions as it traded around 1.4150 against the dollar with the Euro holding near 0.8635.

 

 

CHF

 

Swiss GDP declined 0.5% for the first quarter of 2021, in line with expectations, with the year-on-year decline also at 0.5%. The Swiss PMI manufacturing index strengthened slightly to 69.9 for May from 69.5 the previous month, maintaining expectations of a solid underlying rebound.

The Swiss franc was able to resist further selling pressure on Tuesday despite expectations that the National Bank wanted the currency to weaken further. The Euro dipped to lows near 1.0950 before recovering some ground with the dollar around 0.8970. The franc edged lower on Wednesday with the Euro around 1.0965.

 

 

Technical Levels 

Today's Calendar

 

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?