FOREX: USD - BBDXY Extends Lower Pressing 1203-1204 Support
The BBDXY has had a range today of 1203.09 - 1205.35 in the Asia-Pac session; it is currently trading around {BBDXY Index}. The USD has slipped again in the Asian session following on from yesterday's price action. The move last week had more to do with the surge higher in USD/JPY than any real USD strength as the moves elsewhere in currencies and more importantly in metals attest to. Robin Brook made an important point on Friday, take out the JPY in the USD basket and the USD is falling a lot more than is being appreciated. On the day, I suspect rallies to be faded while the 1210 area holds. First sell-zone is between 1207-1209, can this 1203-1204 area continue to provide support if not a move below here would target 1198-1200.
- EUR/USD - Asian range 1.1755-1.1781, Asia is currently trading {EURUSD Curncy}. The pair broke above the overnight highs in Asia and has extended. On the day, support is back toward 1.1730-1750 initially, as the market tries to build some momentum to test higher into the year-end.
- GBP/USD - Asian range 1.3456-1.3493, Asia is currently dealing around {GBPUSD Curncy}. The pair has regained its upward momentum pushing up to test toward the 1.3500 area. On the day, I look for dips back toward 1.3400-1.3430 to now be supported initially. My skew toward looking for signs to short have not been well founded as of yet.
- Cross asset : SPX +0.02%, Gold $4485, US 10-Year 4.155%, BBDXY 1203, Crude Oil $57.94
- Data/Events : Spain GDP/PPI, Germany Import Price Index
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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RATINGS: Moody's Upgrades Italy To Baa2 From Baa3, Still A Notch Below Others
The Moody's upgrade to Italy's credit rating announced late Friday was the first from the agency since 2002 but shouldn't be considered a major surprise. Among the 3 major ratings agencies, Moody's had the lowest rating on Italy - by two notches (Fitch and S&P both BBB+).
- So this upgrade to Baa2 from Baa3 represents something of a closing of that gap rather than a major breakthrough for Italy.
- From the release:
- "The rating upgrade reflects a consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP). It also points to prospects of further policy actions supporting growth and fiscal consolidation beyond the plan's deadline in August 2026. As a result, we expect that Italy's high government debt burden will gradually decline from 2027 onwards."
FED: Heading Into Its Final Weeks, QT Pace Remains At $20B/Month (2/2)
On the asset side of the Fed balance sheet, we saw a $25B drop in assets, of which just $2B could be attributed to QT in one of its final weeks (ends Dec 1).
- Instead it was a $6B drop in dealer repo operations vs a week earlier, and $17B in "other" areas that aren't related directly to monetary policy and typically don't have any significant impact on the size of the balance sheet (such changes are largely due to items such as bank premises, accrued interest, and other accounts receivable.)
- Discount window takeup edged up $0.3B to $6.1B but remains relatively low.
- QT has totaled just under $21B over the last month, around the expected pace, though as noted this will flatline in December with a pickup in net bills as MBS proceeds are rolled over into T-bills.
LOOK AHEAD: US Week Ahead: Retail Sales, PPI & Claims Headline Thanksgiving Week
A Thanksgiving-condensed week sees data highlights from delayed retail sales and PPI reports for September on Tuesday (Nov 25) before a Wednesday release for weekly jobless claims (Nov 26). Aside, the Fed’s Beige Book should also offer another important update on Wednesday for latest liaison reporting, with no Fedspeak currently scheduled around the holiday and the FOMC media blackout due to start on Saturday, Nov 29.
- As we regularly comment in this weekly publication, Redbook and Chicago Fed CARTS indicators point to solid nominal growth in retail sales, something broadly reflected in analyst consensus for the release.
- PPI inflation will offer a useful albeit not overly timely update on input cost pressures.
- Jobless claims will be watched particularly closely, both for latest initial claims for signs of layoffs and a notable update for continuing claims. The latter covers the payrolls reference period for November and will be an important reference point for FOMC members trying to get a sense of latest unemployment rate clues with the next payrolls reports coming after the Dec 9-10 FOMC decision (going into it with this week’s 0.12bp rise to 4.44% back in September).
