EUROPEAN FX UPDATE: EUR attempts to claw back Friday's losses, USD weaker across the board

DXY: DXY -0.5%; 106.93

• USD has been pressured and the DXY slipped beneath the 107.00 level in reaction to the nomination of billionaire hedge-fund manager Scott Bessent for Treasury Secretary who is seen as a fiscal hawk and has advocated for tax reform and deregulation. This week sees several key announcements for the US leading into the Thanksgiving holiday including US GDP, Core PCE and FOMC Minutes. As it stands, markets price around 14bps of easing for the December FOMC meeting.


• DXY had ventured as high as 108.07 on Friday as the EUR cratered in response to dismal PMI metrics. DXY has since slipped below the 107 mark with a session low @ 106.79.

EUR: EUR/USD +0.7%; 1.0490

• EUR is attempting to bounce back from Friday's heavy PMI-induced losses which saw the pair drop to its lowest level since 2022 @ 1.0332. The recent run of data for the Eurozone has prompted a dovish repricing for the ECB with a near coin-flip between a 25bps or 50bps cut for the December meeting. Today has seen comments from ECB's Lane who remarked that monetary policy should not remain restrictive for too long and restrictive policy is probably no longer needed in 2025.


• EUR/USD made a brief foray onto a 1.05 handle, topping out at 1.0501. If the pair is able to gain a footing above this level, the 21st November peak sits @ 1.0555.

JPY: USD/JPY -0.2%; 154.40

• JPY is faring better than most other peers with some support garnered overnight by a retreat in US yields and the Japanese Cabinet's stimulus package approval. In response to the package, analysts at ING note that it is "encouraging the view that the Bank of Japan will hike in December after all". As it stands, markets price in around 15bps of easing for the meeting.


• USD/JPY has returned to a 154 handle (current session high @ 154.72) after delving as low as 153.56 overnight. If downside resumes, the 19th November low sits @ 153.28.

GBP: GBP/USD +0.3%; 1.2572

• GBP is firmer vs. the USD but softer vs. the EUR which is trying to claw back some of Friday's heavy losses. GBP-specific events today have seen commentary from BoE's Lombardelli who has reiterated the MPC consensus that policy restriction will need to be unwound in a gradual manner, whilst noting that persistent components of inflation and uncertainties around how the labour market will evolve are a cause for concern.


• Cable has struggled to make its way back onto a 1.26 handle after rising to a peak @ 1.2606 overnight and then fading upside. If the pair is able to reclaim 1.26, the 21st November peak sits @ 1.2660.

Antipodeans: AUD/USD +0.1%; 0.6509. NZD/USD +0.2%; 0.5844

• Both slightly firmer vs. the broadly softer USD alongside the encouraging risk environment. NZD chose to overlook NZ Trade Data and Retail Sales as participants await the RBNZ Rate Decision on Wednesday with the Shadow Board recommending a 50bps cut. NZD/USD went as high as 0.5869 overnight before returning back into Friday's 0.5816-60 range.


• AUD/USD has returned to a 0.65 handle with a session but is down from the overnight session peak @ 0.6549.

25 Nov 2024 - 10:10- ForexEU Research- Source: Newsquawk