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

Daily FX Report

Read disclaimer

EUR / USD

 

The German IFO business confidence index dipped to 98.8 for September from a revised 99.6 previously and marginally below consensus forecasts. The current conditions component retreated to 100.4 from 101.4 and below market expectations. The expectations index edged lower to 97.3 from 97.8, although this was slightly above forecasts. The IFO stated that industry supply shortages had worsened and there were no signs that disruptions would ease in the short term with the crisis expected to continue until at least the end of 2021. In this environment, there were expectations that there would be further upward pressure on costs and prices.

US Kansas City Fed President George stated that the criteria for a tapering of bond purchases have been met. She also commented that some of the inflation changes from the pandemic may persist, maintaining expectations that the Fed would announce a tapering of bond purchases at the November meeting.

The dollar overall secured net gains with backing from higher yields while the Euro was unable to make any headway and settled around 1.1720 after testing 1.1700.

CFTC data recorded a sharp decline in long Euro positions to just above 12,000 contracts from near 28,000 with a notable net increase in long dollar positions.

Exit polls indicated a very tight contest in the German general election with close to equal support for the CDU/CSU and SPD parties. Provisional results indicated that the SPD won with 25.7% while the CDU/CSU had 24.1% and there will need to be extended efforts to form a coalition which could take months.

The Euro edged higher in early Europe on Monday as defensive dollar demand remained slightly lower, but failed to make significant headway and settled near 1.1720.

 

JPY

 

There were further uncertainties surrounding the Evergrande situation with a report that US investors had not received the scheduled coupon payment.

US bond yields continued to edge higher after the New York open which helped underpin the US dollar. The yen was unable to make any significant headway and the dollar secured net gains to 110.70 into the European close as risk conditions held firm.

CFTC data recorded a net decline in short yen positions to just over 56,000 from just over 60,000 the previous week.

Markets will be monitoring US negotiations surrounding the US debt limit and government shutdown with an October 1st deadline for avoided a government shutdown.

There were reports that all states of emergency in Japan will be removed this week which provided an element of yen support, but yield trends undermined the Japanese currency. The main focus was still on the Chinese Evergrande situation with expectations that another scheduled coupon on dollar debt would be missed and enter a 30-day grace period. The Chinese central bank again added liquidity aggressively which helped underpin risk appetite during the Asian session.

The dollar tested 6-week highs just above 110.80, but was unable to extend gains and settled around 110.70 in early Europe with the Euro around 129.70.

 

GBP

 

The UK CBI retail sales index slowed sharply to 11 for September from 60 the previous month and well below consensus forecasts of 35. Sales were disappointing for the time of the year and stock levels were again reports being too low, but companies are expecting a stronger performance for October.

The data dampened support for the UK currency and there were fresh doubts whether the Bank of England would be able to sustain a hawkish stance over the next few months. Further evidence of supply issues and disruption to the economy from energy shortages also unsettled confidence. Sterling dipped back below 1.3700 against the dollar while the Euro secured a net recovery to 0.8570 amid speculation that the central bank would not be in a position to increase interest rates.

CFTC data recorded a fresh switch in positioning with a small net short position from a long position of close to 5,000 the previous week. The data illustrates a notable lack of confidence within hedge funds on the underlying direction surrounding the UK currency. Overall sentiment remained fragile on Monday, but solid global risk conditions curbed potential selling pressure with Sterling trading around 1.3680 against the dollar and the Euro around 0.8570.

 

CHF

 

The Swiss franc was able to post a limited advance on Friday with the domestic currency underpinned by a slightly more defensive tone surrounding risk appetite. The Euro retreated to near 1.0830 before stabilising while the dollar settled just above 0.9250 and was unable to make significant headway despite higher yields.

The franc edged lower on Monday with the Euro around 1.0850 and the dollar just below 0.9260 as risk appetite held firm and higher bond yields limited potential demand for the franc. The latest data on sight deposits will be watched closely on Monday for evidence on National Bank activity to curb franc support.

 

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

Our daily commentary, covering market news and closing prices of LME aluminium, copper, lead, nickel, tin, zinc, iron ore, steel, and precious metals.

Daily Report Softs Technical Charts

Technical analysis and charts for the key sugar, cocoa and coffee contracts.

Weekly Report FX Options

Our FX Options Report contains commentary and analysis covering OTC currency option pricing, volatility and positioning. This week’s focus is on EURPLN and the currency trajectory following the deteriorating economic outlook in Europe and rising rates in Poland.

FX Monthly Report May 2022

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs. This month we look at the current inflation outlook across LATAM, Europe, U.S. and U.K. and gauge if central banks will slow their rate hikes. Economic data is weakening and China's poor growth and woeful demand could impact policy makers' decisions. 

Quarterly Metals Report – Q1 2022

Our analysts provide in-depth analysis into the current macroeconomic conditions and how near-term choppiness may subside in the coming months, once the Fed has confirmed its stance on Monetary Policy. The backwardated spreads in the metals market outline the tightness, and the geopolitical tensions between Russia and Ukraine could compound tightness in Europe due to lower energy, metals, and grain exports.