FOREX: Softer-Than-Expected US Inflation Data Weighs on Greenback
Jun-11 16:55
* The USD index gapped to fresh weekly lows following the release of US inflation data for May. He...
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BOE: Taylor On Differences Between Market And Survey Inflation Expectations
May-12 16:53
- Financial market expectations are benign and maybe have even been falling in terms of the breakeven. Household expectations are up a lot.
- All households are asked the question what do you think inflation is right now? And it's interesting that they get it wrong. A lot of them, and often this is not one directional. So when inflation was rising in 2021 2022 many people were low by several percentage points, and then then caught up. And then in the last year or so, many people are high, and maybe they'll eventually catch up.
- You could maybe say, even if they're off on the level, can we treat the difference between what they think one year ahead and what they think now is like what they think the change is, and use that, and I think that produces a similar attenuation of this current inflation expectations rise.
BOE: Taylor Sees US-UK Trade Deal As Slender
May-12 16:46
- Taylor: On the US-UK trade deal, we know some details, but there's obviously a lot to be worked out, and some of these things will, will take weeks. I mean, the average trade deal is like, over 1000 pages, right? The US-UK deal, if it’s a template, is quite slender. It focuses on some relief for steel and aluminium, and there's a little bit of relief on automobiles, on the first 100k but I think we're at close to that export number already.
- There's some wording about maybe pharmaceuticals, and there's been talk of aerospace, but again, all of those details, it doesn't look like it's going to affect the rest of, you know, our exports. So if it's, you know, designer clothes or single malt whisky, sadly, it's going to be you know, quite expensive to export. So I don't know exactly.
- On US-China deal: I don't know exactly what the scope of the China deal might look like. I mean, I don't think we even have a five page document there.
FOREX: USD Consolidates Impressive Advance Following US/China Tariff Reprieve
May-12 16:44
- Despite a less volatile US session, the greenback remains the strongest currency in G10 to start the week, following the US and China agreeing to pause their retaliatory reciprocal tariffs that had been the cause of much trepidation in global financial markets. The news has helped the ICE USD index extend its recovery, rising an impressive 1.35% on the session, while EURUSD slips back below 1.11 to fresh one-month lows for the pair.
- The Japanese Yen is the poorest performing currency amid the significant boost to risk sentiment across global equity markets and the hawkish repricing in core fixed income providing an additional headwind for the low yielders.
- USDJPY is currently up 2.05% as we approach the APAC crossover, exacerbated by a clean break of 50-day EMA resistance that had capped the price action last week. Earlier highs were registered at 148.59, breaching a short-term pivot point at 148.18, which provided the initial resistance point on the chart. Further strength would place the focus on the daily highs from around the ‘liberation day’ announcement at 149.28 and 150.49.
- In similar vein, USDCHF has risen 1.5%, marginally outperforming the DXY. Topside momentum has been underpinned by a break back above the key 0.8333 level, the 2023 low and prior breakdown point. The move substantially narrowed the gap to an important resistance for USDCHF, which stands at 0.8485, the 50-day EMA. A break of this average would signal scope for a recovery towards 0.8578, the April 10 high, while the ‘liberation day’ breakdown level remains much further out at 0.8758.
- Higher beta pairs have relatively outperformed given the risk backdrop, with the Canadian dollar the least impacted on Monday. In similar vein, Latin American currencies and the South African rand have had only moderate adjustments given the ties to China optimism are offsetting the broader rally for the greenback.
- All focus turns to Tuesday’s US CPI report on Tuesday. Labour market data from the UK and German ZEW figures are scheduled during the European morning.
