FOREX: USD/JPY Surges Off Lows as Mixed BoJ Headlines Favour JPY Sales
Dec-11 10:25
- USD/JPY has rallied well off lows, with the pair north of Y152.50 headed into the NY crossover. USD/JPY rallied hard off 151.02 lows on a Bloomberg sources report that flagged that while some officials are "not against" a rate hike in December, the Bank are said to see little cost in waiting for the next hike. The headlines prompted a flurry of activity, with over $1.3bln in JPY futures trading within a minute - comfortably the best participation of the session so far.
- As a result, the USD is firmer Wednesday, with only the AUD and NZD underperforming the JPY. Antipodean currencies came under pressure amid raised speculation that Chinese officials are considering a weaker CNY path across 2025 to counteract the potential impact of US tariffs. The Reuters piece tipped USD/CNH toward Monday highs of 7.2927 in response.
- EUR vols being marked notably higher today, as the overnight contracts now capture the fallout of both the US CPI print later today as well as the ECB rate decision tomorrow. Overnight implied has touched 18.5 points for the second highest reading of 2024 (after the US Presidential election results), which blows out the break-even on an ATM straddle to around 80 pips, over double the YTD average.
- US CPI is the data highlight ahead, with markets expecting the Y/Y print to tick up to 2.7%, and the M/M to 0.3% - an increase of 0.1ppts across both readings. The datapoint is last consequential release ahead of the Fed decision next week.
- The Bank of Canada decision is a key focus Wednesday, with markets expecting another follow-up 50bps rate cut, putting the policy rate at 3.25%. Ahead of the decision, USD/CAD is in minor positive territory and well within range of the cycle high and bull trigger of 1.4195. The pace of the uptrend is typified by the growing premium of the 50-dma over the 200-dma today, which has topped 200 pips - the highest since late 2022.
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FOREX: EURGBP Posts Lowest Weekly Close Since April 2022
Nov-11 10:20
- A cluster of daily lows surrounding the 0.8300 handle had continued to highlight the ongoing and building significance of this medium-term inflection point for EURGBP. The firm reversal from post-budget highs resulted in the cross posting its lowest weekly close since April 2022 on Friday.
- Weakness has extended today, and notably EURGBP has now cleared the bear trigger at 0.8295, the Oct 18 low. Moving average studies are in a bear-mode position, highlighting a dominant downtrend and the ongoing Eurozone growth concerns and brewing political crisis in Germany provide additional weight to the cross.
- Furthermore, GBP’s positive beta to global risk sentiment and the outperformance for US equities will likely bolster EURGBP downside. Goldman Sachs see scope for continued GBP outperformance on crosses over time, particularly versus the Euro, even with EURGBP already back at two-year lows.
- Initial targets include 0.8250, the Apr 14 ’22 low and below here another major support resides at 0.8203, the Mar 7 ‘22 low.
- Tomorrow’s UK labour market data remains in focus despite the MPC noting that it favours a “gradual” cutting cycle. Elsewhere, we will hear from BoE Governor Bailey & Chancellor Reeves as noted in our previous posts.
EURIBOR: EURIBOR FIX - 11/11/24
Nov-11 10:09
EURIBOR FIX - EMMII/Bloomberg.
- EUR001W 3.1480 0.0130
- EUR001M 3.0800 -0.0070
- EUR003M 3.0400 0.0080
- EUR006M 2.8310 0.0090
- EUR012M 2.5280 -0.0060
BOE: Upcoming MPC speakers (2/2)
Nov-11 10:07
- Catherine Mann will also speak twice this week: a panelist at the BNP Paribas Global Markets Conference on Wednesday followed by a speech at the SPE Annual Conference (Society of Professional Economists) with the text due to be released for the latter. Mann is clearly the most hawkish member of the MPC now, and was the only member to dissent last week in favour of keeping Bank Rate on hold. Her comments are therefore unlikely to move markets too much but are still important to listen to.
- Looking ahead to next week, Deputy Governor Ramsden will deliver a speech on monetary policy (on Wednesday after October CPI has been released). He has previously been a dovish dissenter – but voted to maintain Bank Rate on hold in September. We suspect that he sees risks skewed more towards case 1 than case 3 i.e. that he still leans dovishly. If the market continues to price in less than 3 cuts fully in 2025 and he delivers a dovish speech there is potential for a decent market move here.
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