EUROPEAN FX UPDATE: DXY flat & GBP stronger after UK PMIs

DXY: U/C, 106.87

• DXY is flat and has been trading within a very tight 106.75-92 range for much of the European morning. US-specific updates over the weekend have been light, so focus ahead is on today’s US PMI figures ahead of Retail Sales (Tue), FOMC Policy decision on Wednesday (25bps cut expected) and US PCE (Fri).


• As it stands the index currently trades towards the bottom end of Friday’s 106.71-107.18 range; and quite a bit away from its 21 DMA at 106.47.

EUR: +0.1%, 1.0507

• EUR is a touch stronger vs the Dollar, with price action fairly choppy as traders react to a slew the EZ PMI metrics dotted throughout the morning. ECB President Lagarde spoke today, with her commentary very much in-fitting with her remarks made at her press conference; “more rate cuts are to come and the direction of travel is clear, via Bloomberg; risks around inflation are two sided”.


• The French/German figures painted the same picture; manufacturing continues to remain dire, whilst services continue to improve. The EZ-wide figure itself saw both components edge higher and above expectations; metrics which were unable to lift European indices off lows. CapEco writes that these figures strengthen the case for looser monetary policy.


• The Single-currency was little moved to the French figures, but did edge a little higher to the German metrics and continued to reside at the top end of the day’s ranges, which happens to coincide with its 21 DMA at 1.0526. A breach of that level to the upside, will see a potential test of Thursday’s best at 1.0530.


• As a reminder, over the weekend, Moody's cut France’s rating to "Aa3" from "Aa2", outlook stable, in an unscheduled rating revision, citing political fragmentation. Moody's said its view is that France's public finances will be substantially weakened over the coming years.


• German politics watchers will note a confidence vote in the government is expected, which Chancellor Scholz is seen losing; this will spark the formal kick-off for campaigning ahead of a February 23rd election, where polls currently have CDU in the lead, but the SPD's Scholz will be hoping to use the time to bounce-back and mount a challenge.

JPY: U/C, 153.78

• JPY is essentially flat, but is the G10 laggard thus far. Overnight, the Japanese PMI release showed manufacturing rebounding and services improving. USD/JPY sits in a very tight 153.31-96 range, a touch above Friday’s 153.79.

GBP: +0.3%, 1.2657

• GBP is on a stronger footing, in reaction to the region’s PMI release which saw the Services figure above expectations and further into expansionary territory, while Manufacturing was a touch softer.


• The upside in the Pound was a delayed one; potentially as traders digested the headline Services figure and the commentary within the release, whereby it noted that "Policymakers at the Bank of England may be cautious about cutting interest rates, however, given the resurgence of inflation being signalled, adding further to downturn risks in 2025”.


• Cable currently trades at the top end of today’s 1.2609-72 range, with today’s peak coinciding with its 21 DMA at 1.2670. Further upside would see a potential retest of Friday’s 1.2678.

Antipodeans: AUD +0.1%, NZD +0.3%

• Antipodeans are marginally firmer vs the Dollar; the Kiwi outperforms vs the Aussie.


• AUD currently trades at the mid-point of a 0.6348-82 range, and just within Friday’s confines. NZD/USD on the other hand, has topped the best from Friday and currently trades just off the day’s best at 0.5786.

EUR/NOK: +0.5%

• Norges Bank said it is to purchase NOK and sell foreign currency to fund transfers to the government for FY24. This helped to strengthen the NOK, with EUR/NOK slipping from 11.7440 to 11.7130 over the course of eight minutes; thereafter, extended to a session low of 11.7030 before paring almost the entire move.

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