FOREX: NZD Outperforms Post RBNZ, Two-Sided Risks For GBP Into Budget
Nov-26 10:25
- NZD is the outperformer today after RBNZ guidance amid their 25bp cut signals a likely hold through H1 next year. This led NZDUSD to see session highs of 0.5697, breaking above its 20-day EMA. This signals scope for a stronger recovery to 0.5725, which represents both the 50-day and prior trendline support turned resistance. 0.5800 remains a key medium-term pivot.
- AUDNZD meanwhile saw downside following the RBNZ meeting, despite the new monthly Australian CPI coming in firmer than expected. The cross overnight saw its lowest levels this month at 1.1407, with the 50-day EMA providing initial support at 1.1391.
- Dollar weakness and further hawkish BOJ reports promoted USDJPY to print a 155.65 pullback low overnight. With dips remaining very well supported, the pair has firmed since, recovering to 156.40 at typing. A break above the 157.89 November 20 high would signal scope for an extension of the current uptrend.
- GBPUSD still sees notable two-way risk headed into today's Budget - despite trickling details of policy measures across the UK press this morning. This week's spot recovery works against the bearish trend theme, which would resume on a break below 1.3010, the Nov 4 / 5 low, but we also see positioning dynamics possibly creating room for a GBP squeeze, raising the risk of a stronger recovery given the amount of Budget scrutiny the currency has been under this month.
- We still see scope for market surprises, with key uncertainties remaining over headline changes in tax, disinflationary measures, fiscal headroom and scope for Gilt sales. Key resistance meanwhile stands at 1.3261, the 50-day EMA. A clear break of this hurdle would highlight a potential reversal.
- Aside from the UK budget, US MBA mortgage applications, weekly claims, September durable goods orders, MNI Chicago PMI, and the Fed Beige Book are on the calendar.
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Historical bullets
LOOK AHEAD: Monday Data Calendar: Dallas Fed Mfg Activity, 2Y & 5Y Note Auctions
Oct-27 10:23
- US Data/Speaker Calendar (prior, estimate)
- 10/27 1030 Dallas Fed Mfg Activity (-8.7, -7.8)
- 10/27 1130 US Tsy $77B 26W bill & $69B 2Y Note auctions (91282CPE5)
- 10/27 1300 US Tsy $86B 13W bill & $70B 5Y Note auctions (91282CPD7)
- Source: Bloomberg Finance L.P. / MNI
UK FISCAL: GBP3bln said to be needed to balance "unexpected" health spending
Oct-27 10:23
- There are reports that the NHS needs an extra GBP3bln to "avoid making cuts." This is said to be comprised of GBP1bln cost of redundancy payments (from senior management at regional health boards), around GBP1.5bln on higher drug prices (due to a likely deal with the US) and 2xGBP300mln due to strike costs (from the resident doctors' strikes in July and the strike called for in November).
- Minister for Health Wes Streeting was by the asked in an interview with Laura Kuenssberg about both the strike and the redundancy payments and whether the Treasury or the Department for Health would be footing the bill and he dodged the question, noting that he didnt not want to add to Budget speculation.
- Its unclear how this will play out - but these payments are not currently accounted for in the Department for Health's budget - so unless there are cuts this will increase the amount that Chancellor Rachel Reeves needs to find at the Budget.
EUR: FX Exchange traded Option
Oct-27 10:18
EURUSD (7th Nov) 1.1600p, sold at 0.0020 in ~1.2k.
