FOREX: USD Tilts Higher Ahead of US CPI, NOK Rises Post-Norges Bank
Dec-18 10:32
- Despite the initial downside pressure on the USD this week in the lead up to the US employment report, momentum quickly stalled. Short-term positioning dynamics have assisted a moderate dollar squeeze, tilting the USD index into positive territory on the week. Intra-day sentiment and the lack of momentum continue to reflect the limited appetite ahead of a busy central bank calendar as well as the key US CPI data release later today.
- The 0.2% bump higher for the DXY is seeing similar broad-based declines across the rest of the G10. With the Bank of England a particular focus today, GBPUSD has just slipped back below the 1.3350 mark, however, spot remains comfortably above yesterday’s post CPI lows of 1.3312. Initial firm support is 1.3293, the 50-day EMA, and a breach of this average would highlight a possible technical reversal.
- Overnight, New Zealand GDP data rose above expectations in Q3, however, prior downside revisions more than offset the initial beat. This helped NZDUSD slip further back below the 0.5800 pivot point, and spot currently hovers just above its 20- and 50-day EMA’s.
- NOK is a moderate outperformer on the day after Norges Bank remained on hold as expected but revisions to the rate path pushed back on significant easing expectations ahead. This led EURNOK to see a 11.94 session low. Initial support is the prior breakout level of 11.8612 (Nov 25 high). Conversely for SEK, the lack of endorsement for hawkish market pricing amid the expected Riksbank hold may be having some marginal dovish readthrough.
- USDJPY meanwhile extends yesterday's upside, standing just below the 156.00 handle at typing. This means the post-NFP bounce totals around 1.0% as we approach Friday's BOJ meeting, where a 25bp hike to the policy rate remains priced in. Short-term technical parameters appear well defined at 154-158.
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FOREX: USDJPY Uptrend Remains Intact as Takaichi - Ueda Meet Affirms Gradualism
Nov-18 10:32
- Ongoing weak risk sentiment underpins low yielding haven currencies JPY and CHF in a session seeing limited volatility so far. Markets await key official economic data reducing uncertainty about the macro picture - clearing up the Fed policy path for the rest of the year.
- CAD outperforms after PM Mark Carney secured passage of the first federal budget of his tenure, suggesting that despite external headwinds, the Canadian political environment will remain relatively stable in the short-to-medium term. Expectations for a further Bank of Canada cut in this cycle let alone December are pretty much eliminated by now, with the short-term outlook for USDCAD appearing bearish form a technical perspective. Firm core indicators in yesterday's CPI report, in conjunction with earlier stronger-than-expected labour market data have combined to pretty much eliminate expectations for a further Bank of Canada cut in this cycle.
- USDCAD is trading inside a bull channel drawn from the Jul 23 low. The top of the channel - currently at 1.4170 - provided a firm resistance on Nov 11. The subsequent move down highlights scope for a bear extension towards the base of the channel at 1.3893. Initial key support to watch is 1.3968, the 50-day EMA.
- USDJPY price action meanwhile confirmed the resumption of an uptrend and extension of recent gains, with sights on 155.53, a Fibonacci projection. Comments following the meeting between Japanese PM Takaichi and BoJ Governor Ueda did not move the needle, with Ueda noting that he told Takaichi that the Bank is operating a process of gradually adjusting its monetary easing, which the PM "seemed to acknowledge". Initial firm support in USDJPY would be 153.49, the 20-day EMA, a clear breach of which would signal scope for a corrective pullback.
- Fed's Barr and Barkin, the ECB's Pereira and Dolenc, as well as the BoE's Pill and Dhingra are scheduled to speak. Barkin is due to comment on the economic outlook having not commented directly on policy since the last Fed decision.
- The US data calendar is starting to pick up, with weekly ADP, November NY Fed services, weekly redbook retail sales, November NAHB housing index, August factory orders, and September TIC flows likely being released today ahead of tomorrow's UK CPI. A roughly inline UK inflation print with a non-inflationary budget may ensure key voter Bailey will support December cut, which could keep the pressure on GBP.
SLOVAKIA AUCTION RESULTS: Feb-28 / Apr-36 / Feb-43 / Oct-47 SlovGBs
Nov-18 10:29
| Coupon | 3.00% | 0.375% | 4.00% | 2.00% |
| Maturity | Feb-28 | Apr-36 | Feb-43 | Oct-47 |
| Instrument | SlovGB | SlovGB | SlovGB | SlovGB |
| ISIN | SK4000024683 | SK4000018958 | SK4000022547 | SK4120013400 |
| Amount | E95mln | E100mln | E150mln | E88mln |
| Previous | E136mln | E93mln | E105mln | E100mln |
| Avg yield | 2.2851% | 3.5353% | 4.0772% | 4.2053% |
| Previous | 2.2945% | 3.4279% | 4.0400% | 4.1247% |
| Bid-to-cover | 1.46x | 1.75x | 1.25x | 2.91x |
| Previous | 2.20x | 2.91x | 3.85x | 3.30x |
| Avg Price | 101.5223 | 72.8553 | 99.0407 | 68.8248 |
| Low Price | 101.4800 | 72.6510 | 98.7700 | 68.6100 |
| Pre-auction mid | 101.606 | 72.879 | 99.225 | 68.282 |
| Prev avg price | 101.8317 | 73.4624 | 99.4869 | 69.6697 |
| Prev low price | 101.8100 | 73.3600 | 99.2660 | 69.5220 |
| Prev mid-price | 101.936 | 73.162 | 99.047 | 69.181 |
| Previous date | 19-May-25 | 20-Oct-25 | 16-Sep-25 | 20-Oct-25 |
BUNDS: Multi-Month Range Intact, UBS Look For 3% In ‘26
Nov-18 10:26
Even with the recent sell off on German 10s stalling before a test of October’s yield highs (leaving the multi-month range of 2.52-2.80% intact) UBS still look for the benchmark to “gradually rise towards 3% at the end of 2026 and the German curve to further steepen as Germany transitions to a new fiscal regime”.
- They suggest that “investors may struggle to gauge the fiscal impulse beyond 2026 and will want to be compensated for fiscal risk”. Meanwhile, UBS “do not think that German bunds will benefit much from the US rates rally we expect in the next quarters as bunds will increasingly trade on domestic developments”.
- They also expect further outperformance vs. swaps and look for the 2s10s curve to hit 100bp in H226.
Fig. 1: German 10-Year Yield (%)
Source: MNI - Market News/Bloomberg Finance L.P.
