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

Daily FX Report

Read disclaimer

EUR / USD

 

Euro-zone CPI inflation was confirmed at 3.4% for September from 3.0% previously with the core rate at 1.9%. There was little impact on the Euro with markets assuming that the ECB would maintain an accommodative policy stance which would also limit potential single currency support.

The Euro was hampered slightly by Bundesbank head Weidmann’s comments that he would leave the bank at the end of this year.

The dollar was unable to make headway ahead of the New York open with the currency hampered by further strong demand for commodity currencies amid robust risk conditions. There were also expectations that other global central banks would tighten policy which would limit the dollar’s relative appeal. There was little change in trend after the New York open with the dollar overall remaining on the defensive. In this environment, the Euro traded close to 1.1650 at the European close.

Fed Governor Quarles stated that it’s clear the tests for tapering asset purchases had been met and supported a decision at the November policy meeting to start reducing bond purchases. He also stated that his focus was turning towards inflation and away from the labour market. There were underlying concerns over inflation expectations with one measure hitting an 8-year high. Cleveland Fed President Mester also stated that her inflation forecasts had been revised higher.

The dollar was unable to secure any significant support from the release, but commodity currencies were subjected to a correction on Thursday which limited the potential for further dollar selling despite fragile sentiment. The Euro was held close to 1.1650 in early Europe after failing to register a fresh 3-week high.

 

JPY

 

Long-term Treasuries edged lower after the New York open with the 10-year yield slightly higher, but there was a small decline in the 5-year yield. Overall risk appetite held firm which limited the scope for yen demand, but the currency was able to resist further selling amid concerns that short yen positions were over-extended against the dollar and on the crosses. In this environment, the dollar retreated to the 114.20 area against the yen at the European close.  

The Federal Reserve Beige Book of economic conditions noted that a majority saw modest to moderate growth and the near-term outlook for activity remained encouraging. Most districts reported significantly elevated prices with strong demand for goods and supply-chain difficulties. The inflation outlook was mixed, but many firms reported a greater ability to raise selling prices and pass-on increased costs. There was also strong upward pressure on wages within the economy.

The Chinese Evergrande situation will be watched closely with the company needing to pay coupons on dollar bonds by Monday to avoid an official default.

Asian equities were mixed while risk conditions were slightly more cautious which limited the potential for further yen selling, especially with Japan uneasy over the impact on import prices. In this environment, the dollar retreated to near 114.00 with the Euro just below 133.0 as the yen secured some respite on the crosses.

 

GBP

 

Sterling lost ground after the latest UK inflation data with a slight cooling of expectations that the central bank would decide on an early increase in interest rates. The UK currency dipped to lows below 1.3750 against the dollar and the Euro rallied to 0.8460 as investors also looked to take profits after a strong Sterling advance.

Overall risk appetite held firm which limited the potential for underlying selling and there was fresh currency demand after the New York open. With inflation certain to rise again next month, a Bank of England rate hike was likely to remain a live issue for the November policy meeting.

Sterling moved back above 1.3800 against the dollar at the European close with the Euro retreating to 0.8425 and close to 20-month lows.

Markets were monitoring Brexit developments with the potential for France to announce sanctions on the UK this week. There were also reservations over domestic coronavirus trends and risk appetite was slightly less optimistic. Sterling, however, maintained a firm tone and held above 1.3800 against the dollar in early Europe with the Euro around 0.8430. The latest UK business and consumer confidence data together with retail sales will be watched closely on Friday.

 

CHF

 

The Swiss franc edged lower in early Europe on Wednesday with the Euro peaking around 1.0765. Risk appetite held firm, but the franc was resilient and gradually regained ground later in the day. The Euro retreated to near 1.0710 while the dollar dipped below the 0.9200 level towards the European close.

The franc gained some support from the announcement that Bundesbank head Weidmann would leave the bank at the end of this year. The Swiss currency was again resilient on Thursday, especially with risk appetite slightly more cautious and the dollar was held below the 0.9200 level.

 

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 November 2021

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs, this month we focus on Turkey. Inflation continues to rise and the Central Bank cut rates, as the Fed starts to become hawkish. The report includes a macroeconomic overview as well as desk comments and technical analysis on key currency pairs.

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?