EUROPEAN FX UPDATE: Dismal EZ PMIs forces EUR/USD onto a 1.03 handle and accelerates calls of a 50bps ECB cut

DXY: DXY +0.4%; 107.45

• USD firmer vs. all peers (ex-JPY) alongside risk aversion triggered by a dreadful set of Eurozone PMI metrics (see below for details). DXY has been bolstered by the softer EUR given that it accounts for around 58% of the index. In terms of US-specific developments, markets still await Trump's Treasury pick with reports stating that he is considering Kevin Warsh to serve as Treasury Secretary and then Fed Chair, according to WSJ. S&P Global PMIs are due on deck later and whilst they normally play second-fiddle to the ISMs, a strong showing from the US could see a widening of US-EZ rate differentials and further bolster the USD. DXY has been as high as 108.09 which marks a fresh YTD peak; DXY hasn't traded on a 108 handle since November 2022.


• US PMIs and Fed's Bowman due later.

EUR: EUR/USD -0.5%; 1.0418

• A dismal set of EZ PMI metrics has acted as a drag on EUR/USD with the pair printing a fresh YTD low and slipping onto a 1.03 handle for the first time since December 2022. Given the velocity of the price action, it is hard to gauge if technical levels will provide much in the way of support. Instead, calls for a move to parity are likely to be heightened. Odds of a 50bps December move have accelerated dramatically with a 50bps move priced at around 60% vs. circa 20% yesterday. ECB's Schnabel due to speak @ 15:45GMT.


• 
  EZ HCOB Manufacturing 45.2 vs. Exp. 46.0 (Prev. 46.0), Services (Nov) 49.2 vs. Exp. 51.6 (Prev. 51.6), Composite Flash PMI (Nov) 48.1 vs. Exp. 50.0 (Prev. 50.0)


• EUR/USD opex: 1.0450 (464mln), 1.0475 (1bln), 1.0500 (3.2bln), 1.0525-40 (1.5bln), 1.0550 (634mln), 1.0600 (2.6bln).

JPY: USD/JPY -0.1%; 154.31

• JPY steady vs. the USD following a session of outperformance yesterday. The latest Japanese inflation data provided little to spur price action as the figures printed mostly in line with expectations aside from the core reading which was slightly firmer-than-expected at 2.3% (exp. 2.2%) and is unlikely to have any ramifications for near-term BoJ policy. USD/JPY is currently caged within yesterday's 153.90-155.39 range.


• 
  Japanese National CPI YY (Oct) 2.3% vs. Exp. 2.3% (Prev. 2.5%), CPI Ex. Fresh Food YY (Oct) 2.3% vs. Exp. 2.2% (Prev. 2.4%), CPI Ex. Fresh Food & Energy YY (Oct) 2.3% vs. Exp. 2.3% (Prev. 2.1%).-*USD/JPY opex: 154.00 (1.2bln), 155.00-05 (530mln).

GBP: GBP/USD -0.5%; 1.2522

• A busy day of data for the UK has seen retail sales and PMI reports. On the latter, all three metrics fell short of expectations with the all-important services metric slipping into neutral territory and the accompanying release noting that the data is indicative of GDP dropping at a 0.1% quarterly rate with the potential for worse to come.


• GBP/USD briefly slipped onto a 1.24 handle for the first time since 9th May (1.2445 was the low that day). Pricing for the BoE's December meeting is little changed with just around 5bps of loosening expected. However, around 70bps of cuts are now priced by the end of 2025 vs. 60bps pre-release.


• 
  UK Retail Sales MM (Oct) -0.7% vs. Exp. -0.3% (Prev. 0.3%, Rev. 0.1%), YY (Oct) 2.4% vs. Exp. 3.4% (Prev. 3.9%, Rev. 3.2%), Ex-Fuel MM (Oct) -0.9% vs. Exp. -0.4% (Prev. 0.3%, Rev. 0.1%), Ex-Fuel YY (Oct) 2.0% vs. Exp. 3.3% (Prev. 4.0%, Rev. 3.2%). UK Flash Services PMI (Nov) 50.0 vs. Exp. 52.0 (Prev. 52.0), Manufacturing 48.6 vs. Exp. 50.0 (Prev. 49.9), Composite 49.9 vs. Exp. 51.8 (Prev. 51.8).

Antipodeans: AUD/USD -0.3%; 0.6489. NZD/USD -0.4%; 0.5833.

• Both softer vs. the broadly firmer USD and in the wake of losses in Chinese equities overnight. AUD/USD has slipped back onto a 0.65 handle and taken out a slew of recent lows but is yet to approach the WTD base from Monday @ 0.6447. Selling pressure in NZD/USD has dragged the pair to a fresh YTD low @ 0.5823 ahead of next week's RBNZ policy announcement. Markets assign a 71% chance of a 25bps reduction and 29% chance of a larger 50bps move.

22 Nov 2024 - 10:05- ForexData- Source: Newsquawk