EUROPEAN FX UPDATE: CHF hit by surprise SNB 50bps rate cut, EUR eyes ECB

USD: DXY U/C; 106.51

• USD steady after an early bout of weakness that didn't appear to be driven by any particularly obvious catalyst. Looking ahead, focus remains on price data following yesterday's CPI report with PPI metrics due on deck. The release will be used to frame expectations for the Fed's preferred gauge of inflation - PCE. Note, initial jobless claims are also due. It's worth noting that a 25bps cut next week is virtually nailed on with markets assigning a 97% chance of such a move. DXY remains within yesterday's 106.26-80 range.

EUR: EUR/USD +0.2%; 1.0511

• EUR/USD is just about holding above the 1.05 mark in the run-up to today's ECB rate decision. Consensus looks for the ECB to deliver a 25bps rate cut with just an 18% chance of a deeper 50bps cut. Albeit, markets will be on guard given the SNB surprise earlier in the session. Focus for the release will be on hints of further easing and whether the ECB drops language around rates needing to be “sufficiently restrictive for as long as necessary”. EUR/USD currently sits within yesterday's 1.0480-1.0539 range.


• EUR/USD opex: 1.0475 (1bln), 1.0500 (1.7bln), 1.0525 (566mln), 1.0550 (2.1bln), 1.0560 (476mln), 1.0575-85 (1.2bln), 1.0600 (1.6bln).

JPY: USD/JPY +0.1%; 152.57

• USDJPY a touch higher after a choppy APAC session which saw initial JPY strength fade following source reporting via Reuters that the BoJ is leaning towards keeping rates steady next week, albeit, there is no consensus within the bank on the final decision. Markets pricing assigns a 77% chance of a hold next week. USD/JPY currently sits towards the top end of yesterday's 151.00-152.86 range.


• USD/JPY opex: 152.00 (820mln), 152.15-25 (1.1bln), 152.70 (1.3bln), 153.00 (320mln), 153.25 (351mln).

GBP: GBP/USD +0.1%; 1.2760

• GBP relatively contained vs. the USD as UK-specific drivers remain light. Tomorrow's monthly GDP print unlikely to be a gamechanger for the BoE. Note, next week will see things pick-up markedly with UK flash PMIs, jobs, CPI, retail sales data and the BoE policy announcement all due on deck. On the latter, just 2bps of easing is priced in for the meeting. Cable briefly eclipsed yesterday's best, printing a session peak @ 1.2787 before settling into yesterday's 1.2714-1.2782 range.

Antipodeans: AUD/USD +0.6%; 0.6411. NZD/USD +0.4%; 0.5807

• AUD is top of the G10 leaderboard following the Aussie jobs report which saw Employment Change topping forecasts (driven by full-time employment) whilst the Unemployment Rate surprisingly fell to 3.9% despite forecasts of an uptick to 4.2% from 4.1%, although the Participation Rate surprisingly dipped. AUD/USD saw a boost nonetheless and moved back onto a 0.64 handle after hitting a YTD Low yesterday @ 0.6336. NZD/USD is back above 0.58 after hitting a YTD Low yesterday @ 0.5761.


• AUD/USD opex: 0.6390-0.6400 (730mln), 0.6450 (1.4bln), 0.6485-90 (591mln), 0.6500-10 (1.3bln).

CHF: EUR/CHF +0.5%; 0.9326

• CHF on the backfoot after the SNB surprised markets by pulling the trigger on a deeper 50bps cut vs. expectations of a smaller 25bps move. The decision was accompanied by a reiteration that the Bank remains willing to intervene in the FX market as necessary whilst 2024 and 2025 inflation forecasts were lowered. At the follow up press conference, President Schlegel noted that developments for CHF remain the important factor. Market price in an additional 50bps of easing by the June meeting next year. EUR/CHF spiked higher from 0.9280 to 0.9335 before extending to 0.9345; highest since 20th November.

12 Dec 2024 - 10:00- ForexData- Source: Newsquawk