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

Daily FX Report

Read disclaimer

EUR / USD

 

The dollar remained under pressure in early Europe on Thursday with the Euro advancing to highs near 1.1480 as the single currency held firm.

ECB Vice-President de Guindos stated that inflation will not be as transitory as expected some months ago and the inflation risk is moderately on the upside. Nevertheless, he also forecast that inflation in 2023 and 2024 will be back below 2% and overall inflation pressures were under control.

Philadelphia Fed President Harker stated that he favoured starting to shrink the balance sheet from late this year or early next year which had some impact in dampening expectations of a more aggressive Fed stance, although he also backed an interest rate increase at the March policy meeting.

Richmond head Barkin stated that policy normalisation will need to be pursued more aggressively if inflation remains high and widespread.

Chicago Fed President Evans commented that demand for goods has exploded while services demand has weakened. In this context, inflation is too high and his forecast is aligned with three rate hikes in 2022. The dollar managed to stabilise late in Europe with the Euro settling around 1.1460.

Hawkish Fed rhetoric continued with San Francisco head Daly stating that it would be quite reasonable to raise rates in March while Governor Waller stated that three or four rate hikes are a good baseline position for 2022 and that the balance sheet could start to be reduced around mid-year.

The latest US retail sales data will be released on Friday with expectations that sales will be unchanged, although there has been some speculation that there will be a weaker than expected release and decline in sales for the month. There will be a risk of an erratic release on seasonal grounds which may trigger a choppy market reaction. The dollar was close to 2-month lows on Friday with the Euro around 1.1465 and position adjustment will be important later in the day.

 

JPY

 

US initial jobless claims increased to 230,000 in the latest week from 207,000 and above consensus forecasts of 200,000, but continuing claims declined to 1.56mn from 1.75mn which suggested that there was still strong demand for labour within the economy.

Producer prices increased 0.2% for December with the year-on-year rate remaining at 9.7% and marginally below 9.8%. Underlying prices increased 8.3% over the year compared with expectations of 8.0% and underlying concerns over inflation trends persisted in markets. US Treasuries edged higher after the US open with a limited decline in bond yields which capped potential dollar support. The yen was resilient on the crosses and the dollar was held below 114.50.

Equities retreated into the European close with the dollar sliding to test the 114.00 level.

China posted a record trade surplus for December and 2021 as exports posted a strong performance while import growth missed forecasts.

Asian equity markets overall were on the defensive and the dollar weakened further to around 113.75 in early Europe on Friday with the Euro around 130.50.

 

GBP

 

There was further evidence of a tight UK labour market which will inevitably be an important focus for the Bank of England. Sterling held a firm tone in Europe on Thursday, although there was resistance close to 1.3750 and a limited correction as the US currency looked to stabilise after a series of losses.

Sterling was hampered to some extent by concerns over a squeeze on real incomes, especially given the impact of higher energy prices with a huge increase in household energy bills scheduled to come into effect from April 1st even if the government takes action to ameliorate the pain. Sterling was unable to hold 1.3750 and lost ground as the US currency stabilised with a weaker tone surrounding risk appetite also curbing support while the Euro edged above 0.8350.

There was little change on Friday with. UK GDP increased 0.9% for November, above expectations of 0.4% and the industrial data also beat expectations, although the market reaction was muted with Sterling around 1.3730 against the dollar as optimism that coronavirus restrictions would be eased helped to underpin confidence.

 

CHF

 

The Swiss franc was able to secure further net support on Thursday with no further selling on yield grounds. The Euro continued to edge lower after a failure to sustain a brief move above 1.0500 earlier this week and posted net losses to below 1.0450. The dollar remained under pressure and dipped to test support below 0.9100.

Risk conditions were also slightly more fragile on Friday which curbed potential franc selling and the dollar edged below 0.9100 on Friday. There will still be caution over the risk of National Bank intervention to weaken the franc with choppy trading likely during the day.

 

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

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. 

Quarterly Metals Report – Q3 2022

Our analysts provide an in-depth analysis of the metals market and current macroeconomic conditions. The environment has weakened significantly as growth fears rise amid persistent high inflation. Central banks are data-dependent, which could mean they slow rate hikes as growth starts to slow. This has meant a downside to the US 10yr yield, but also we see a downside to rate hikes in Q4. Europe will likely enter a recession before the US and take longer to recover, but material availability is significantly lower, shown by low inventories.

FX Monthly Report June 2022

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs. This month we look into the JPY and the pressure the BOJ is under to change their monetary policy as JPY continues to weaken against major currencies. Economic data is weakening and inflation is less of a problem in Japan, but yields continue to test the cap.