EUROPEAN FX UPDATE: USD consolidates whilst Kiwi soars

Analysis details (09:05)

USD, JPY

DXY has continued to consolidate on a 106 handle within 106.35-106.78 parameters after venturing as high as 107.25 yesterday following hawkish remarks from Fed 2022 voter Bullard. Macro updates since yesterday have been on the light side and as such, the greenback is struggling for direction with today’s data docket also lacking in tier 1 releases. As it stands, in the bigger picture, DXY was able to form a base on Tuesday at 105.30 after the CPI/PPI route crushed the greenback. However, it remains to be seen how much lost ground the USD can recoup with a slew of hawkish Fed rhetoric this week unable to prompt a meaningful recovery. Analysts at ING suggest “this consolidation phase in the dollar may extend for a little longer, before a re-appreciation of the greenback into the end of the year.” USD/JPY is back on a 140 handle after bottoming out at 137.67 on Tuesday with the pair thus far unable to breach its 100DMA at 140.96.

EUR

EUR/USD is back on a 1.03 handle and in close proximity to yesterday’s closing level of 1.0360. Macro updates have seen commentary from ECB President Lagarde whereby the policy chief stated that the ECB will continue with its rate hiking campaign whilst noting that the GC needs to normalise other tools in order to reinforce the impulse from rate increases. Overall, the speech did little to sway expectations for the December meeting which currently leans towards a 50bps move as hawks have done little publicly to make the case for continuing with a 75bps increment. Next week’s flash PMIs might serve as a reminder of the dire growth outlook for the Eurozone and as such, could see a scaling back of current market pricing for 2023 which sees a peak rate of 3% by summer. From a technical perspective, technicians continue to highlight EUR/USD’s inability to hold a footing above its 200DMA which is currently situated at 1.0412.

GBP

Cable has traded in and around the 1.19 mark throughout the European morning with the pair fully reversing the downside seen in the wake of UK Chancellor Hunt’s Autumn statement which underscored the difficult fiscal and growth outlook the UK faces. Retail Sales for October exceeded expectations with a M/M expansion of 0.6% vs. Exp. 0.3%, that said, sales volumes remain some 0.6% lower than pre-pandemic levels. Note, some desks have attributed the strength in the GBP to EUR/GBP selling. If the move to the upside continues for the pair, yesterday’s high resides at 1.1958, whilst a breach of 1.20 would open up a test of Tuesday’s 1.2029 weekly high. Today’s speaker slate sees MPC’s Haskel partake in a panel discussion.

AUD, NZD

Antipodeans have led the charge in the G10 space thus far with NZD the clear outperformer with no clear over-arching driver behind Kiwi’s gains. Markets will have one eye on the next RBNZ meeting with 15 out of 23 analysts polled by Reuters forecasting a 75bps move. Analysts at ANZ suggested “The RBNZ has already proven that it's not in the least afraid to go its own way, and the global tilt towards slower hikes is unlikely to play a significant part in the decision”. Its antipodean counterpart is firmer against the USD but to a lesser degree with AUD/USD currently lingering around the 0.67 mark after being pushed as low as 0.6632 yesterday as the USD fought back. From a technical perspective, a potential close above the 100DMA at 0.6694 is being closely eyed.

18 Nov 2022 - 09:05- Research Sheet- Source: Newsquawk