EUROPEAN FX UPDATE: Cyclicals lead, havens lag post-China policy comments

USD: DXY U/C; 105.92

• USD is showing a mixed performance vs. peers (weaker vs. cyclicals, stronger vs. havens). In terms of US-specific updates, there was a slew of Fed speak ahead of the blackout period which didn't move the dial either way. US President-elect Trump over the weekend said he has no plans to remove Powell and said he cannot guarantee Americans will not pay more as a result of tariffs. This week's main focus will be on Wedensday's US CPI data (0.3% M/M core expected). Post-NFP on Friday, odds of a 25bps cut sit @ 87%. DXY briefly breached Friday's high @ 106.15 before fading upside and slipping back onto a 105 handle.

EUR: EUR/USD U/C; 1.0571

• EUR flat against the USD and off worst levels. Focus for the Eurozone this week is on events in Frankfurt with the ECB set to pull the trigger on a 25bps cut. Markets had been speculating on a larger 50bps move but this looks unlikely with members of the GC failing to publicly endorse such a move. After struggling to hold above 1.06 post-NFP, EUR/USD remains stuck on a 1.05 handle, just above the 1.0550 mark.


• EUR/USD: 1.0500 (658mln), 1.0520-25 (369mln), 1.0540 (525mln), 1.0550-60 (768mln), 1.0590 (518mln), 1.0600 (1.2bln), 1.0620-25 (1.2bln).

JPY: USD/JPY +0.3%; 150.47

• JPY, along with CHF is lagging across the majors as news out of China has triggered a pick-up in sentiment and subsequently weighed on havens. For Japan specifically, focus overnight was on an upward revision to Q3 GDP. Market pricing assigns a 29% chance of a BoJ hike on 19th December. USD/JPY is back on a 150 handle with the pair now showing a great deal of direction over the past few sessions. Currently contained within Friday's 149.36-150.69 range.

GBP: GBP/USD +0.2%; 1.2770

• Fresh macro drivers for the UK remain light, as was the case towards the end of last week. This could remain the case with BoE's Ramsden's speech today set to focus on financial stability, whilst GDP on Thursday is unlikely to prove to be a gamechanger. As such, it is possible that the USD leg of the equation will do the heavy lifting for the pair. Cable has gained a firmer footing on a 1.27 handle but has failed to approach the 1.28 handle; Friday's high sits just above @ 1.2811.

Antipodeans: AUD/USD +0.7%; 0.6438. NZD/USD +0.6%; 0.5860

• Both near the top of the G10 leaderboard following positive commentary out of China in which the Politburo noted that fiscal policy is to be more proactive next year, whilst monetary policy is to be moderately loose; first shift in monetary policy since 2011. AUD/USD has reclaimed the 0.64 mark but is below Friday's 0.6455 high. RBA awaits tomorrow; expected unchanged. NZD/USD hit a MTD low @ 0.5804 overnight before picking up off the lows.

09 Dec 2024 - 10:05- ForexData- Source: Newsquawk