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

Daily FX Report

Read disclaimer

EUR / USD

 

The IFO institute cut its German 2021 GDP growth forecast to 2.5% from 3.3% previously, primarily due to the impact of supply-side issues. Tight ranges prevailed ahead of Wednesday’s New York open with risk conditions relatively steady while there was caution ahead of the Federal Reserve policy decision.

ECB council member Muller stated that it would be troubling if there is a steep cliff effect after the conclusion of the PEPP bond purchases and that the central bank will discuss increasing the regular bond purchases to smooth conditions. Risk appetite gradually improved and the dollar edged lower with tentative Euro gains to 1.1735.

The Fed made no policy changes, in line with expectations. In its policy statement, the Fed recognised that the economy was continuing to strengthen and that progress had been made towards meeting its goals. It also confirmed that the inflation rate is on track to modestly exceed 2% for some time.

The statement added a specific reference that, if progress continues as expected, a moderation in the pace of asset purchases may be warranted soon.

As far as the interest rate projections from individual committee members are concerned, there was a limited net shift with 9 of 18 members now expecting the first rate increase in 2022 from 7 at the June meeting with the other nine projecting the first hike in 2023. The median 2023 rate projection was increased to 1.0% from 0.6%.

The overall tone of the statement and rate projections were slightly more hawkish than expected.

Chair Powell stated that the Fed plans to end asset purchases in the middle of next year if the economy remains on track. This comment was more hawkish than expected and reinforced expectations that an announcement would be made at November’s meeting. Powell did add that the Fed is still a long way from passing the lift-off test, but he did not signal significant concern over the Evergrande situation.

There was choppy trading with the dollar initially losing ground before posting significant gains to 1-month highs as Powell’s hawkish tone provided support. The Euro dipped lower to test support below 1.1700 with 1-month lows near 1.1680. The US currency retreated slightly on Thursday with the Euro just above the 1.1700 level.

 

JPY

 

Bank of Japan Governor Kuroda stated that household spending remains weak due to state of emergency measures which dampened yen support slightly.

US Treasuries edged lower into Wednesday’s New York open with a slight increase in yields and the dollar settled around 109.50 against the yen. As equity markets posted stronger gains, yen demand faded on the crosses with a limited dip in defensive support.

After a mixed initial reaction, the dollar gained renewed traction following Powell’s comments, but it was held below 110.00 as the yen resisted significant selling.

Asian market conditions were relatively calm with the acute Evergrande fears easing, although there was still a high degree of uncertainty. Expectations of liquidity support underpinned regional equity markets and the dollar traded around 109.80 against the yen with the Euro just above 128.50 amid a holiday in Tokyo.

 

GBP

 

Sterling was unable to make any headway in Europe on Wednesday with the Euro testing resistance above 0.8600 while the UK currency was contained below 1.3650 against the dollar. There was a significant advance for the FTSE 100 index, but the UK currency struggled to take advantage of the steadier risk tone.

Sterling did recover from lows as equity markets strengthened further into the Federal Reserve policy statement and the Euro was unable to hold the 0.8600 level.

After brief gains following the Fed statement, there were fresh losses against the dollar with 1-month lows close to 1.3600.

The Bank of England will announce its latest policy decision on Thursday with unease over the recovery profile dampening expectations of hawkish rhetoric. Markets will be monitoring rhetoric closely with a focus on whether a majority consider that conditions for an increase in rates have been met. Overall risk appetite held firm on Thursday which provided an element of support with Sterling edging higher to around 1.3640 against the dollar while the Euro traded close to 0.8580.

 

CHF

 

The Swiss franc held firm into Wednesday’s European close with the Euro securing only a slight net recovery to the 1.0830 area. There was choppy trading following the Fed policy meeting with the dollar settling with net gains to around 0.9265.  

The National Bank will announce its latest policy decision on Thursday with no changes in interest rates expected, but the rhetoric will be watched closely with a particular focus on comments on the franc.  The franc edged lower in early Europe with the Euro around 1.0840 and the dollar around 0.9260.

 

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.

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?

FX Monthly Report September 2021

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs. The report includes a macroeconomic overview as well as desk comments and technical analysis on key currency pairs.