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

Daily FX Report

Read disclaimer

EUR / USD

 

The Euro-zone Sentix investor confidence index retreated to -22.6 for May from -18.0 previously and weaker than consensus forecasts of -20.8.

The dollar overall maintained a strong tone in early Europe, especially with commodity currencies remaining under heavy pressure. Underlying Euro-zone sentiment also remained weak during Monday, but Euro was able to find support below the 1.0500 level and another failure to hold it below this level triggered a round of short covering

Minneapolis Fed President Kashkari stated that the Fed will change its approach if the data comes in differently and there was some evidence that inflation was softening just a hair. Atlanta Fed President Bostic stated that 50 basis-point increases are pretty aggressive and that the Fed can stay at this pace with no need for 75 basis-point increases. He added that the Fed Funds rate needs to be in a range of 2-2.5% by the end of 2022.

There were some concerns that weaker equity markets would undermine the US outlook and speculation that this could trigger at least a limited reassessment by the Fed. The Euro strengthened to highs above 1.0570 before faltering again with a decline to 1.0530 at the European close.

The dollar lost some ground as US yields moved lower and there was a further element of Euro short covering on Tuesday with the single currency close to 1.0575.

 

JPY

 

The latest New York Federal Reserve survey recorded a decline in 1-year inflation expectations to 6.3% from 6.6%, although the 3-year component increased to 3.9% from 3.7%. The Conference Board employment trends index retreated to 120.2 from 120.6 previously.

US Treasures regained some ground ahead of the New York open and secured a further advance after the Wall Street open, especially with a further slide in US indices with the S&P 500 index sliding to 13-month lows and an 18-month low for the Nasdaq index.

The yen also gained an element of defensive support as risk appetite continued to deteriorate amid heavy losses in equites. In this environment, the dollar retreated from 20-year highs around 131.35 to trade around 130.20 towards the European close and failed to recover into the US close.

Japanese finance ministry Suzuki stated that forex stability is important and rapid moves are undesirable, but there was no evidence of a change in Bank of Japan policy at this stage. Overall confidence in the Chinese outlook remained very fragile on Tuesday with further stresses in the property sector. The dollar dipped below the 130.00 level as equities retreated further, but there was a tentative risk rebound later in the session with the dollar recovering to near 130.50 as equity futures attempted to rally.

 

GBP

 

Sterling was subjected to further selling pressure after Monday’s European open amid further domestic and global pressures. Confidence in the UK economy remains notably weak and the further slide in risk appetite was also crucial in undermining UK currency support. Sterling dipped to fresh 22-month lows close to 1.2260 against the dollar, but there was an aggressive round of short covering amid evidence that the UK currency was over-sold after very heavy losses.

Bank of England MPC member Saunders stated that key measures of longer-term inflation expectations are uncomfortably high and that a process of de-anchoring expectations would be very costly in economic terms. In this context, the bank should lean heavily and the risk of higher inflation becoming embedded and that he wanted to move quickly to a more neutral stance. He added that an estimate of the neutral rate is between 1.25-2.50%, but he did not back a rate increase of 75 basis points at the latest policy meeting with the choice seen as between 25 and 50 basis points. Overall confidence in the UK outlook remained very fragile.

Sterling recovered to highs just above 1.2400 against the dollar, but failed to sustain the advance and retreated steadily back to near 1.2300.

BRC data recorded a 1.7% decline in like-for-like sales in the year to April and there were further concerns over Brexit developments. Risk trends tended to dominate and a very fragile recovery allowed Sterling to recover to near 1.2360 on Tuesday with the Euro around 0.8555 as overall Sterling sentiment remained weak.

 

CHF

 

According to the latest data, total Swiss sight deposits increased to CHF750.9bn in the latest week from CHF744.4bn previously. The notable increase for the week suggests that the National Bank had been intervening more aggressively to help push the franc weaker.

The franc was again unable to gain support from the slide in risk appetite with the currency undermined by higher global yields. The Euro strengthened further to highs near 1.05 while the dollar posted a fresh 26-month high around 0.9965. The dollar retreated to around 0.9920 on Tuesday with the franc maintaining a fragile tone.

 

Technical Levels 

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 EURCHF following the surprise rate hike from the Swiss central bank last week. 

Quarterly Metals Report – Q2 2022

Our analysts provide an in-depth analysis of the metals market and current macroeconomic conditions. Central Banks are raising rates to curb inflationary pressures and the cost of living crisis in the Euro area and the UK. Economic data and consumer demand are weakening and market sentiment has been impacted accordingly. This, in conjunction with lockdowns in China, has caused demand for metals to soften and shift the Chinese market into surplus, but supply chain logistics have tightened the European market. The easing of lockdowns will boost sentiment and prompt a rally in the near term, but the market is moving into selling rallies as opposed to buying dips.

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.