FOREX: Uncertainty Over Data Impact Limiting DXY Momentum
Nov-18 12:14
- Despite the sharp volatility for the Nasdaq and gold in recent sessions, both pulling back ~5%, the USD index has remained in a relatively contained range, finding solid support at 99.00, but unable to make meaningful moves back toward the recovery highs. Market impact has been more distinct among higher-beta FX, likely reflective of valuation-driven positioning in the AI and tech sectors.
- Market participants are also likely trying to assess whether the plethora of incoming US data, and in particular any surprises in Thursday’s NFP report, might be viewed through a policy or growth lens. With that said, the short-term DXY uptrend remains intact having been well supported by the 50-day EMA since early October.
- This average intersects at 98.93, of which a close below would be a bearish development for the greenback. Topside focus remains on the layered resistance between 100.25-48, significant for a more meaningful dollar recovery.
- Goldman Sachs thinks the US growth story will be more prevalent, and note EM, AUD, and JPY should be among the biggest movers on Thursday. They believe their preferred EM carry longs (including BRL, ZAR) should be relatively insulated to payrolls outcomes when funded out of CAD.
- ING’s base case remains that risks are tilted to the downside for the dollar once the US data cycle kicks in, and they expect a December Fed cut to become the market’s base case again. Similarly, Danske Bank believe there are greater downside risks for the USD. They note if the capital rotation out of US assets continues and a sharp US recession hits, EUR/USD could break substantially higher than their current 12 month forecast of 1.22 suggests.
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LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
Oct-17 20:51
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
Oct-17 20:30
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Oct-17 20:28
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
