EUROPEAN FX UPDATE: DXY back above 107.00, GBP posted early gains after hot wages

DXY: +0.2%, 107.00

• DXY is on a firmer footing and topped 107.00 in early European trade, to currently trade at the top-end of a 107.05-106.69 range. This comes amid a catalyst-thin session for the Dollar thus far, but the upside may be derived from the risk-off sentiment seen in today’s session.


• Should the upside continue, the Dollar index could see a potential test of the prior day’s best at 107.16, and then 107.18 from Friday 13th December.


• The North American day sees the release of US retail sales, which are expected to rise +0.5% M/M in November (see below for primer). US manufacturing output and industrial production are both expected to rise in November. The NAHB’s housing market index is seen rising 1 point in December to 47.


• As part of Barclays month- and quarter-end rebalancing model, it shows USD neutral against most major peers. Month-end signals show weak Dollar buying vs most majors.

EUR: -0.2%, 1.0485

• EUR is on the backfoot vs the Dollar, after posting modest gains in the prior session. Overnight, the single-currency managed to climb above its 21 DMA at 1.0518, to a session high of 1.0534, but has since succumbed to Dollar-led pressure.


• For the EUR itself, the German Ifo figures were mixed, with the Business Climate and Expectations components printed below expectations whilst the Current conditions improved a touch. Overall the figures only further confirmed the dire situation in the region, which sparked some modest pressure in EUR/USD, taking it to a session trough of 1.0482. At the same time, German Finance Agency said it intends to issue around EUR 380bln of debt in 2025, -13% Y/Y; this sparked some upside in Bunds. Thereafter the release of the German ZEW Survey painted a more optimistic picture in Germany, with experts noting that the economic outlook is improving. This helped to lift the EUR ever so slightly, a move which ultimately proved fleeting.


• ING writes that given the “proximity to the FOMC risk events suggests EUR/USD may well remain anchored to 1.0500 today”.

GBP: +0.1%, 1.2690

• GBP is flat vs firmer for most of the morning, with upside stemming from traders trimming their bets for more cuts in the coming year following today’s hot jobs reports, with particular focus on the wages components which surpassed the top end analyst expectations.


• The fall in the payrolls component was notable, and points to pressure in the UK labour market, pressures which may serve to somewhat offset the hawkish implications of the above; as, until now, evidence had largely been that payrolls growth had stalled rather than was falling.


• In an immediate reaction to the data, Cable shot higher from around 1.2670 to 1.2694, before then briefly topping 1.27 in the 10 minutes or so after. Thereafter, the upside was capped by the Dollar strength, with Cable dipping back toward the mid-point of its 1.2667-1.2706 range.

JPY: -0.2%, 153.78

• The JPY is the best G10 performer thus far, in contrast to the losses seen in the prior day. USD/JPY currently trades in a 153.76-154.34 range, and just within the confines made on Monday.


• Overnight updates for Japan were light, and the pair ultimately traded sideways for much of the APAC session. The Dollar-side of the story may be a little more interesting today, given US Retail Sales is due in the afternoon, with the Fed on Wednesday and then the BoJ thereafter.

Antipodeans: AUD -0.5%, NZD -0.4%

• Antipodeans are on the backfoot and in-fact the worst G10 performers, given the subdued risk sentiment and losses in commodity prices.


• AUD/USD has dipped below Monday’s worst to a current session trough of 0.634, a level not tested since the 23rd November 2023; the low from that day is 0.6363. The Kiwi is also on the backfoot, and looks to test a recent low at around 0.5753.

17 Dec 2024 - 10:20- ForexData- Source: Newsquawk