EUROPEAN FX UPDATE: USD gives back some of its FOMC-induced gains

USD: DXY -0.2%; 108.22

• USD is giving back some of its gains which saw DXY top the 11th November 2022 peak overnight (108.44) to make a 108.48 high. The main driving force for the USD's gains this week has of course been the "hawkish" cut from the FOMC on Wednesday. Today will see a slew of Fed speakers on the wires who can help further explain the announcement. Williams, Daly, Hammack are all due on deck with particular interest on the latter given her hawkish dissent at the meeting. On the data slate, US PCE data for November is due with the core M/M print expected to decline to 0.2% from 0.3% with the Y/Y rate seen at 2.9% vs. prev. 2.8%. As it stands, markets assign just an 11% chance of a cut next month with a total of 39bps of easing seen by year-end.

EUR: EUR/USD +0.2%; 1.0378

• EUR is edging out slight gains vs. the USD but remains on a 1.03 handle after printing a fresh low for the month earlier @ 1.0344 in the wake of comments from US President-elect Trump cautioning that the EU "must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!". Aside from this, macro drivers for EUR remain light. It is worth noting that there is some huge option activity in EUR/USD for today's NY cut, detailed below.


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  EUR/USD opex: 1.0300 (3BLN), 1.0325 (5.6BLN), 1.0350 (4.8BLN), 1.0390-1.0400 (8BLN), 1.0425-30 (6BLN), 1.0440 (3.1BLN), 1.0450 (8.3BLN), 1.0500 (10.3BLN)

JPY: USD/JPY -0.4%; 156.72

• JPY is attempting to undo some of the damage seen over the past few session as a hawkish Fed cut and lack of a hike from the BoJ has driven the pair from a 153.32 base on Wednesday to a multi-month high overnight @ 157.92. Some respite has been granted following hotter-than-expected Japanese CPI overnight and currency jawboning by Japanese officials, who expressed concerns over recent JPY moves. As it stands, markets are divided over whether the BoJ pulls the trigger on a hike next month with around 11bps of tightening priced for the meeting.

GBP: GBP/USD U/C; 1.2496

• GBP flat vs. the USD and lagging peers following soft UK retail sales data for November in what has been a generally busy week for UK data as well as yesterday's dovish hold by the BoE. Cable has slipped onto a 1.24 handle for the first time since 22nd November with a current session trough @ 1.2476. The next target to the downside comes via the 9th May low @ 1.2445. In tandem, EUR/GBP is now back on an 0.83 handle after printing a multi-year low yesterday @ 0.8222.


• 
  GBP/USD opex: 1.2490 (1.2BLN), 1.2500 (2.1BLN), 1.2600 (720M), 1.2650 (682M)


• 
  EUR/GBP opex: 0.8250 (1.3BLN), 0.8290 (835M), 0.8300 (3.8BLN), 0.8310 (588M)

Antipodeans: AUD/USD U/C 0.6235. NZD/USD +0.1%; 0.5636

• AUD unable to make much headway vs. the broadly softer USD in what has been a bruising week for AUD/USD after the pair made a fresh YTD low yesterday @ 0.6200 to hit its lowest level since October 2022. AUD/USD has staged a modest recovery since but is a far cry from the 0.6348 level seen at the start of the week. Similar price action for NZD/USD which hit a fresh YTD low yesterday @ 0.5609 to trade at its lowest level since October 2022. Overnight, Kiwi overlooked a narrower trade deficit and a rise in exports.

20 Dec 2024 - 09:55- ForexData- Source: Newsquawk