EUROPEAN FX UPDATE: GBP dented by disappointing GDP, JPY lags, DXY above 107

USD: DXY +0.1%; 107.10

• DXY is up for a 6th consecutive session and back on a 107 handle for the first time since Nov 26th (107.50 was the high that day) in a week that has seen inflation data lean "towards the firmer side of expectations", according to ING. Albeit, the desk notes that "it does now look like next week's release of the core CPI deflator will come in at a reasonable 0.2% month-on-month". Looking ahead to next week's widely-anticipated Fed 25bps cut, ING does not expect the announcement to have a major impact on the USD. Today's docket is light with just US Import/Export Prices on deck.

EUR: EUR/USD U/C; 1.0471.

• EUR steady vs. the USD as the dust continues to settle on yesterday's 25bps ECB rate cut. Sources followed the announcement, noting that the GC is prepared for a quarter-point rate cut at the next two meetings inflation stabilizes at the 2% target and economic growth remains sluggish. ECB speak this morning has continued to stress the inevitability of further easing in the coming months. This is relatively unsurprising at this stage and as such, EUR/USD only made an incremental new low for the month @ 1.0452. The next target comes via the 26th November low @ 1.0424. Note, there is some huge option activity today in EUR/USD (detailed below).


• 
  EUR/USD opex: 1.0375 (2.6bln), 1.0400 (5.2bln), 1.0420-25 (1.9bln), 1.0450-60 (2.7bln), 1.0470-75 (1.5bln), 1.0500 (7.6bln), 1.0520-25 (1.8bln), 1.0535 (1bln), 1.0550 (2.7bln), 1.0570-80 (1bln), 1.0600 (4.8bln).

JPY: USD/JPY +0.4%; 153.37

• JPY has continued to lose out to the USD throughout the European morning. JPY saw some fleeting support overnight in response to the higher-than-expected optimism among large Japanese manufacturers from the BoJ's Tankan Survey. Recent JPY weakness has coincided with a pick-up in risk sentiment (CHF has also moved lower in tandem). Attention now turns to next week's BoJ policy announcement. The latest survey from Reuters suggested that the BoJ is to hold the key interest rate at 0.25% in December, according to 58% of economists polled (vs 44% in the Nov poll), while 51 of 52 economists say the central bank will hike to 0.50% by the end of March 2025. USD/JPY up for a 5th consecutive session with a session peak @ 153.39; highest since Nov 26th (154.48 was the high that day).

GBP: GBP/USD -0.3%; 1.2626

• GBP on the backfoot and near the bottom of the G10 leaderboard following soft M/M GDP data for October which printed at -0.1% vs. Exp. +0.1%. Pantheon Macroeconomics is of the view that "much of the drop in GDP can, however, be put down to erratic sectors that should bounceback in November". That being said, PM has cut its Q4 Q/Q forecast to 0.1% from 0.3% (MPC expects 0.3%). Accordingly, Cable slipped below its 21DMA @ 1.2670 and fell to a session low @ 1.2620; lowest since December 2nd (1.2616 was the low that day).

Antipodeans: AUD/USD U/C; 0.6367. NZD/USD -0.1%; 0.5762

• Contained vs. the USD in quiet trade with upside for AUD capped by the soft performance for Chinese markets overnight as traders digested the release from the Chinese Economic Work Conference, which overall seems like a disappointment as it offered little in terms of details whilst reaffirming the recent policy shift. AUD/USD failed to sustain a move back onto the 0.64 handle yesterday and currently sits just above its YTD low @ 0.6336. NZD/USD softer and has made an incremental fresh YTD trough @ 0.5756.

13 Dec 2024 - 10:00- ForexData- Source: Newsquawk