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

Daily FX Report

Read disclaimer

EUR / USD

 

ECB President Lagarde stated that inflation is increasingly likely to stabilise at 2% over the medium term while the bank also has scope to adjust policy in a timely fashion should it see risks of excess inflation extending into the medium term. She also warned that the war could cause the start of a new inflationary trends while the February Euro-zone CPI inflation rate was revised slightly higher to 5.9% from 5.8%. There was a slight shift in interest rate expectations with markets pricing in 50 basis points of rate hikes by the end of 2022 from 45 basis points on Wednesday. The Euro continued to edge higher into the New York open.

US initial jobless claims declined to 214,000 in the latest week from 229,000 and below forecasts of 220,000 while continuing claims declined to 1.42mn from 1.49mn.

The Philadelphia Fed manufacturing index strengthened to 27.4 for March from 16.0 previously and comfortably above market expectations of 15.0. There were much stronger readings for new orders and shipments and employment also increased at a faster rate on the month with the employment index at a record high.

There was a sharp increase in the prices paid component to the highest rate since June 1979 while the prices received index also strengthened on the month

The dollar was unable to gain significant support from the data and the Euro continued to move higher.

ECB council member Knot stated that two rate hikes this year can’t be excluded with the hawkish overall rhetoric underpinning the currency. Fellow member Visco stated that administered prices would not be a bad idea for a short period. The Euro pushed above the 1.1100 level towards the European close with a peak above 1.1130 before a correction. Higher energy prices hampered the Euro with a retreat to 1.1085 on Friday with unease over Ukraine developments also a significant element.

 

JPY

 

US housing starts increased to an annual rate of 1.77mn for February from 1.64mn the previous month and above consensus forecasts of 1.69mn. Building permits declined slightly to 1.86mn from 1.90mn. The industrial production increase was in line with expectations at 0.5% despite a stronger manufacturing reading. Treasuries overall were little changed on Thursday with the 10-year yield around 2.14% which limited the scope for US currency support and wider losses pulled the dollar lower.

Overall risk appetite held firm during the day despite comments from Western officials that there is a very big gap between Russian and Ukraine positions on peace talks. From lows around 118.40, the dollar rallied to 118.60 amid tentative conditions.

The Bank of Japan made no changes to monetary policy and will continue to target bond yields at 0.0% while the central bank also downgraded its economic assessment and will ease policy further without hesitation as needed. Markets were continuing to monitor geo-political developments with US President Biden and Chinese counterpart Li due to speak on Friday. Regional equity markets posted a further limited net advance on Friday with the dollar advancing to around 118.95.

 

GBP

 

Sterling continued to gain ground ahead of Thursday’s Bank of England policy decision amid speculation over a hawkish rate hike. The central bank increased interest rates by 0.25% to 0.75% which was in line with consensus forecasts. There was, however, an 8-1 vote for the increase with Cunliffe dissenting and calling for no change. There were, therefore, no calls for a 0.50% hike at this meeting. The central bank warned that inflation was liable to increase further and there is the risk of a fresh spike higher in the fourth quarter of 2022 as retail energy prices will be increased again. The bank, however, was also uneasy over the growth outlook with a squeeze on incomes. The bank stated that interest rates would be likely to increase again, although with less conviction given reservations over growth trends.

Overall market expectations of future rate hikes were downgraded following the policy statement with rates now seen below 2.0% at the end of 2022 and Sterling declined sharply. The UK slumped to lows below 1.3100 against the dollar before a recovery to 1.3150 while the Euro posted a strong advance to 0.8430 from highs around 0.8460. Overall risk appetite held firm which provided some protection with Sterling around 1.3155 on Friday and the Euro around 0.8420.

 

CHF

 

The Swiss franc was able to resist further selling pressure on Thursday even though risk appetite held firm. The Swiss currency was also resilient even with expectations of further global central bank tightening over the next few months and a dovish stance from the National Bank.

The Euro edged higher to test the 1.0400 before correcting slightly while the dollar posted a second successive day of significant losses with a slide to 0.9350.

The franc resisted further losses on Friday with the franc around 0.9360 as markets remained unease over the risk of Ukraine developments ahead of the weekend.

 

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.

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.

Daily Report Softs Technical Charts

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

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.