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

Daily FX Report

Read disclaimer

EUR / USD

The German trade surplus declined in October with solid monthly growth in exports and imports for the month, although there was no significant impact.

There were further reports of potential ECB policy action at next week’s policy meeting with some expectations of a temporary boost to bond purchases. The Euro overall was unable to make any headway ahead of the New York open with underlying yield spreads undermining support with a further decline in short-term Euro yields.

US initial jobless claims declined to 184,000 in the latest week from a revised 227,000 the previous week. This was below consensus forecasts of 215,000 and the lowest figure since 1969. Continuing claims increased to 1.99mn from 1.95mn and slightly above expectations, but the initial claims data maintained confidence in the labour market even with potential distortions surrounding the Thanksgiving period.

The dollar was able to regain further ground the day with commodity currencies losing ground and the Euro dipped below the 1.1300 level.

There was a significant element of caution ahead of the US CPI release on Friday. Consensus forecasts are for a further sharp increase in the headline rate to 6.8% from 6.2% which would be the highest rate since 1982 while the underlying rate is forecast at 4.9% from 4.6%. Stronger than expected data would increase pressure on the Federal Reserve to tighten policy more quickly and announce a change at next week’s policy meeting while a lower release would provide some relief.

Narrow ranges prevailed on Friday with the Euro finding some further support below 1.1300 despite negative underlying sentiment.

JPY

Chinese new loans increased CNY1,270bn for November from CNY826bn the previous month, although this was below consensus forecasts of CNY1550bn. There was a stronger increase in total social financing of CNY2,610bn which was only slightly below expectations while money supply growth slowed to 11.7% from 11.9%.

The Chinese central bank announced that it would increase the reserve ratio on foreign exchange purchases to 9% from 7% which was aimed at curbing yuan appreciation and the yuan dipped sharply following the release, although the dollar was unable to make any headway against the yen.

Risk appetite remained more fragile during Thursday with the WHO stating that a further 2-3 weeks would be needed to study the Omicron variant more thoroughly.

US Treasuries strengthened during the day and the 10-year bond yield retreated to below 1.50% which sapped dollar support. The yen also secured an element of defensive support and the dollar dipped below 113.50.

There were further reservations over the outlook for the Chinese property sector, although the yuan recovered from Thursday’s dip lower.

Asian markets overall lost ground during the session and the dollar settled close just above 113.50 with the Euro around 128.20.

GBP

Sterling came under further pressure ahead of Thursday’s New York open with a retreat to near 1.3170 against the dollar. Sentiment was undermined by unease over the impact of further coronavirus restrictions with the risk that a sharp increase in Omicron infections would undermine the economy as a whole. There was also a further downgrading of expectations that the Bank of England would raise interest rates next week, especially given coronavirus uncertainty.

The UK currency did avoid a fresh 2021 low against the dollar which helped trigger a recovery to the 1.3200 area despite a generally cautious tone surrounding global risk appetite and the Euro also retreated to just below 0.8550. Sterling gained some net support on valuation grounds.

UK GDP increased 0.1% for October after a 0.6% increase the previous month and below consensus forecasts of 0.4% with further weakness in industrial production and construction. The data will maintain unease over underlying trends in the economy, especially with concerns that the services recovery will falter. Sterling was, however, resilient after the data and held above the 1.3200 level against the dollar while the Euro traded just below the 0.8550 level.

CHF

The Swiss franc was unable to secure further gains on Thursday despite a more defensive tone surrounding risk appetite. Markets remained wary over potential National Bank action to curb franc gains and there was also caution ahead of next week’s quarterly policy meeting.

The Euro consolidated around 1.0430 against the franc while the dollar posted a net advance to the 0.9250 area before fading slightly. There is likely to be further position adjustment ahead of next week’s National Bank policy decision with the dollar held around 0.9245 on Friday.

Technical Levels

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.

Weekly Report FX Options

Commentary and analysis covering OTC currency option pricing, volatility and positioning.

Daily Report Softs Technical Charts

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

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?