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

Daily FX Report

Read disclaimer

EUR / USD

 

The Euro-zone current account dipped into deficit for March with a shortfall of EUR1.6bn after a revised EUR15.7bn surplus the previous month. The 12-month surplus narrowed to EUR219bn and 1.8% of GDP from EUR294bn and 2.6% of GDP the previous year. 

ECB policy remained an important focus with reports that a majority of policymakers are prepared to back at least two 25 basis-point rate increases this year.

Minutes from the April policy meeting reported that there was widespread concern over high inflation number and some members viewed it as important to act on policy without undue delay. There are now very strong expectations that the ECB will act to raise rates at the July meeting, but still important scepticism whether the bank will be able to secure support for a series of rate hikes, especially given Euro-zone growth risks.

The dollar was unable to take advantage of weaker risk conditions in early Europe and gradually lost ground as the Euro secure support below the 1.0500 level.

Initial US jobless claims increased to 218,000 in the latest week from a revised 197,000 previously and slightly above consensus forecasts of 200,000.

The Philadelphia Fed manufacturing index declined sharply to 2.6 for May from 17.6 previously and below expectations of 16.0. There were, however, strongly monthly readings for new and unfilled orders as well as shipments. Employment indicators were mixed with strong employment growth, but a dip in weekly hours. Cost pressures remained strong, but there was a slight easing of price readings. Companies were less optimistic over the outlook and expect a slight easing of inflation pressures.

There was a tentative recovery in risk appetite after the Wall Street open with a strong rally in commodity currencies and the dollar also posted sharp losses.

In this environment, the Euro rallied strongly to highs just below the 1.0600 level. There was a slight retreat to 1.0585 on Friday with markets wary over higher volatility.

 

JPY

 

Risk appetite remained fragile ahead of the New York open with the yen continuing to gain net support from risk aversion. There was a significant rally in Treasuries ahead of the US open and this trend continued amid some expectations that underlying inflation trends would peak amid a dip in demand for goods.

The 10-year yield retreated to near 2.80% and the dollar dipped sharply to lows near 127.00 before a recovery to 127.70 as equities rebounded.  

Japan’s core inflation increased to 2.1% for April from 0.8% previously which just above consensus forecasts of 2.0% and the highest reading since 2015.

The data maintained some expectations that the Bank of Japan would adjust monetary policy, although there were no indications of a move with the ultra-dovish stance continuing. The Chinese central bank held the 1-year lending rate at 3.70% while the 5-year rate was cut to 4.45% from 4.60%. The rate cut helped underpin risk appetite during the Asian session with expectations of further support, although there was still an important element of caution over the outlook.

The dollar advanced to highs around 128.20 before a retreat to 127.70 as the yen was resilient on the crosses with the Euro around 135.00.

 

GBP

 

Sterling found support on dips in early Europe on Thursday with failure to keep the pair below 1.2350 against the dollar triggering a further rebound on short covering.

The CBI industrial orders index strengthened to 26 for May from 14 previously and above consensus forecasts of 11. Manufacturers were more confident over orders and output, but cost pressures remained acute with expected growth in prices close to record highs and overall sentiment remained weaker.

There was some relief that the Metropolitan Police concluded the investigation into Downing Street coronavirus restriction breaches. Sterling benefited from a net recovery in risk appetite and a further round of short covering. The UK currency surged to highs around 1.2525 against the dollar while the Euro edged lower to 0.8465.

The latest UK consumer confidence index dipped to-40 for May from -38 previously and equalled the record low seen in April 2020. Retail sales data, however, was stronger than expected with a 1.4% April increase compared with forecasts of a small decline. The data helped underpin confidence with Sterling around 1.2485.

 

CHF

 

The Swiss franc continued to post gains on Thursday despite a net improvement in risk appetite. There was a decline in US bond yields and further speculation that the National Bank would tolerate franc appreciation over the medium term.

The Euro dipped to lows below 1.0250 before a recovery to 1.0300 while the dollar hit lows around 0.9710. The franc maintained a firm tone on Friday amid further speculation that the National Bank would look to tighten monetary policy over the medium term with the dollar held just above 0.9700.

 

Technical Analysis

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.