EUROPEAN FX UPDATE: USD rally pauses for breath as DXY moves back onto a 105 handle

USD: DXY U/C; 105.96

• DXY started the session off on the front foot once again as the ramifications of a Trump Presidency remain at the forefront of investor sentiment. This is now being felt in Fed pricing with the odds of a December cut slipping to 65% from circa 80% at the start of the week with the next 25bps cut not fully priced until March 2025.


• Attention today will (potentially only temporarily) shift towards the data slate with US CPI due on deck. A soft release could reignite bets for near-term Fed easing.


• Headline CPI is expected to rise by 0.2% in October, matching the prior month's pace. The Y/Y is expected to rise by 2.6%, accelerating from the prior 2.4%. The core metrics are expected to rise 0.3% M/M and 3.3% Y/Y, maintaining the prior months' pace. Fed’s Logan, Williams, Musalem, Kashkari, Schmid are due to speak.


• DXY printed an incremental new high overnight @ 106.21; highest since 1st May (106.49 was the high that day). However, the index has since slipped back onto a 105 handle.

EUR: EUR/USD U/C; 1.0622

• EUR started the session on the backfoot vs. the USD and briefly made a fresh YTD low @ 1.0594. The pair has since moved back onto a 1.06 handle. However, the ramifications of a Trump Presidency continue to act as a drag for the Eurozone outlook.


• On which, ECB's Kazaks has noted that US tariffs will not be good for Europe and might push up inflation, whilst ECB's Villeroy later echoed this sentiment.


• EUR/USD opex: 1.0580 (745mln), 1.0600 (2.1bln), 1.0605 (344mln), 1.0625-30 (1.5bln), 1.0650 (1.4bln), 1.0700 (1.3bln), 1.0745-50 (1.4bln)

JPY: USD/JPY +0.2%; 154.84

• JPY's run of losses since the start of the week has continued with USD/JPY crossing the 155 threshold for the first time since 30th July (155.21 was the high that day).


• It is likely that Japanese officials will attempt to continue to jawbone the currency. However, given the noteworthy repricing for Fed easing, it is unlikely that it will turn the tide for the pair, absent a hawkish shift from the BoJ.

GBP: GBP/USD U/C, 1.2750

• GBP steady vs. the USD and EUR with fresh macro drivers for the UK on the quiet side other than BoE's Mann remarking that inflation has "definitely not been vanquished" and headline inflation is not informing the MPC whether underlying dynamics have been vanquished.


• Given that US inflation is on deck, it may well be the USD leg of the equation which provides impetus for Cable today. The pair currently sits towards the bottom end of yesterday's 1.2719-1.2873 range. If breached, this could open up a test of the 1.27 mark; not crossed since 8th August - 1.2664 was the low that day.

Antipodeans: AUD/USD U/C; 0.6530, NZD/USD +0.1%; 0.5932

• AUD/USD initially extended on its recent run of losses with sentiment surrounding China acting as a drag on the pair. Markets remain concerned over recent Trump appointments which clearly lean on the hawkish side against China. AUD/USD went as low as 0.6518 today but has since picked up a touch and is holding above last week's multi-month post-election low @ 0.6511.


• NZD is steadier than its Antipodean peers vs. the USD and currently caged within yesterday's 0.5909-72 range; the lower end of which is the lowest level since August 5th.

13 Nov 2024 - 10:20- ForexData- Source: Newsquawk