First Trump Tariff Threat Shows It’s Not Just About the Economy

27. 11. 2024 - Josef Brynda

Tariff Coercion

With Donald Trump leading in the polls ahead of the election, policymakers in Seoul were coming up with a game-plan. If Trump wins and threatens tariffs, then South Korea — which has the seventh-largest trade surplus with the US — could ramp up imports of American energy.

It would be a win-win: Korea could avoid tariffs, the trade imbalance might come down. European Commission President Ursula von der Leyen similarly pitched to Trump directly, after his victory, buying more US liquefied natural gas. In Mexico City, officials have been working to curb some Chinese imports to avert criticism that their nation was serving as a conduit for China goods to enter the American market.

One thing in common with all those approaches: they speak to economics. And, thinking back to Trump’s first term, that might have made sense. His escalatory rounds of tariffs on China came in the run-up to a Phase One trade agreement. He slapped levies on washing machines to aid US manufacturers.

Trouble is, Trump’s Monday evening bombshell announcement of tariffs on the top three sources of US imports — Mexico, China and Canada — were tied to nothing economic. The measures, to be set in an executive order when Trump takes office Jan. 20, were cast as necessary to clamp down on migrants and illegal drugs flowing across borders.

Daily Analysis 2024/11/27

27. 11. 2024 - Josef Brynda

Latest news

USD

• USD strains under weekend gap but strengthens against CAD and AUD post-election.
• PCE inflation data and GDP revisions in focus for the USD's short-term movement.
• U.S. Treasury yields rise, supporting a cautious USD rebound.
• Market expectations for gradual Fed rate cuts lend mixed support to the USD.
• USD gains capped by cautious optimism over tariff impacts and geopolitical risks.
• Middle East tensions create volatility but fail to disrupt broader USD strength.
• USDJPY dips below the 154 handle, signaling weaker USD momentum against JPY.
• Expectations for tighter fiscal and trade policies under Trump support USD demand.
• USD index retreats from recent highs, reflecting mixed sentiment around tariffs.
• Positive labor market data, including low jobless claims, provide USD stability.
• Core PCE prices rose 2.1%, indicating inflationary pressures supportive of USD.
• US GDP grew 2.8% in Q3, boosting confidence in the USD's economic outlook.
• Durable goods orders exceeded expectations, reinforcing USD resilience.
• USD weakness against JPY highlights geopolitical concerns' impact on currency flows.
• Euro's retreat from 1.05 level allows USD to regain some footing.
• Initial jobless claims at 213K showcase underlying U.S. labor market strength.

CAD

• CAD stabilizes despite Trump’s tariff threats on Canada, Mexico, and China.
• Canada's economy braces for potential recession in 2025 due to U.S. trade policies.
• CAD/USD hovers near 4.5-year highs as market sentiment turns cautious.
• Crude oil's retracement near $72/barrel limits CAD upside potential.
• CAD faces headwinds as U.S. trade policies create economic uncertainty.
• Canada's reliance on U.S. trade remains a vulnerability for CAD in the near term.
• Despite oil price volatility, CAD remains supported by recent market adjustments.
• Market speculation around OPEC+ meetings weighs on CAD sentiment.
• Canadian GDP faces downward revisions due to anticipated tariff impacts.
• CAD finds temporary support from Middle East tensions influencing oil markets.
• Weakness in the USD allows CAD to recover some ground in forex trading.
• U.S. fiscal policies spark concerns for CAD's export-driven economy.
• Canadian bond market stability contrasts with CAD's currency market volatility.
• Trump's trade rhetoric continues to cast a shadow on CAD's future performance.
• Mixed commodity performance further complicates CAD's forex positioning.
• Market relief over delayed tariffs supports CAD against USD and EUR.

EUR

• EUR struggles as Eurozone growth lags behind the UK and U.S.
• Trump’s tariff policies pose additional risks to the Eurozone's fragile recovery.
• ECB's anticipated rate cuts weigh on EUR, pushing it below 1.05 against USD.
• Eurozone inflation slowdown raises concerns for the EUR’s medium-term prospects.
• Deteriorating growth expectations create additional downside for EUR.
• EUR/GBP tests lows at 0.83 as the UK economic outlook outshines the Eurozone.
• Tariff-related fears affect European automakers and weigh on EUR sentiment.
• Michel Barnier warns of Eurozone market instability amid fiscal tensions in France.
• ECB's cautious policy stance fails to lift EUR sentiment in forex markets.
• EUR/USD remains under pressure due to stronger U.S. economic performance.
• Euro's oversold condition persists despite recent relief rallies post-gap higher.
• Eurozone remains vulnerable to U.S. trade threats, limiting EUR upside.
• French bond risk premium adds further strain to EUR sentiment.
• Soc Gen highlights relative weakness of EUR amid economic divergence with GBP.
• EUR gains capped as investors await clarity on U.S. tariffs and ECB policy.
• Political instability in the Eurozone adds to EUR's bearish forex positioning.

GBP

• GBP remains strong against EUR due to superior UK growth forecasts.
• The pound faces mixed prospects against the USD amidst strong U.S. economic data.
• GBP/EUR hovers near multi-year highs at 0.83 as the Eurozone struggles with growth.
• Labour's tax policies raise concerns over the UK's economic growth trajectory.
• HSBC forecasts limited GBP downside against USD at 1.26 near-term.
• UK inflation remains high, lending some support to the GBP in forex trading.
• Brexit-era GBP resilience continues to provide strength against weaker EUR.
• Soc Gen expects UK economic growth to outperform the Eurozone into 2025.
• GBP's reliance on stable growth outlook supports near-term stability in forex.
• Political uncertainty in the Eurozone benefits GBP/EUR positioning.
• Tariff fears affect UK exports, but the pound holds due to broader macro support.
• GBP's outperformance reflects UK's steady economic outlook amid trade tensions.
• GBP/USD stability tied to UK's mid-Atlantic policy stance between U.S. and EU.
• UK labor market pressures could challenge long-term GBP prospects.
• HSBC sees limited potential for GBP's further gains against EUR without new catalysts.
• Fiscal policies from the UK Treasury support GBP resilience amid global uncertainty.

AUD

• Australian dollar under pressure due to global tariff concerns and a weaker demand outlook for industrial metals.
• AUD retraces near the 64-cent handle amidst China's trade slowdown and tariff risks.
• RBA's reluctance to act until February/March further pressures AUD.
• Trade wars weigh on AUD, with CNY's devaluation adding indirect strain.
• AUDNZD dropped as NZD surged after RBNZ's decision to cut rates.
• Weak consumer price inflation in Australia keeps AUD near a 3-year low.
• Australian stock market gains fail to lift AUD sentiment amid global macro concerns.
• AUD's inability to hold above 65 cents reflects weak confidence in recovery.
• Risk aversion in commodities like copper and oil adds downside to AUD.
• Ongoing trade concerns between the U.S. and China exacerbate AUD's decline.
• AUDUSD trading remains volatile as market watches U.S. PCE and GDP revisions.
• Tariff-driven fears pull AUD away from short-term highs near the 65-cent range.
• AUD sentiment remains dampened as Australia's economic resilience is questioned.
• AUD faces headwinds from a resurgent USD post-election.
• Australian consumer and business sentiment weaken, limiting AUD recovery.
• Global volatility around trade talks keeps AUD vulnerable to downside risks.

NZD

• NZD surges following a 50 basis point RBNZ rate cut as guidance suggests further easing.
• Strength in the NZD reflects confidence in RBNZ's inflation management.
• NZD gains against AUD as RBA policy lags in comparison to RBNZ's proactive measures.
• Strong rebound in NZD/USD supported by dovish guidance and policy clarity.
• RBNZ’s decision boosts market sentiment, driving NZD toward weekly highs.
• NZD remains resilient despite global trade volatility impacting other undollars.
• Inflation decline to mid-range supports NZD's strength post-rate decision.
• NZD's rally pressures AUDNZD below critical resistance at 1.11 levels.
• Short-term NZ rates rise, adding to NZD's attractiveness against AUD and USD.
• RBNZ’s cautious optimism contrasts with global central banks, lifting NZD confidence.
• Trade concerns have less impact on NZD compared to AUD, enhancing its appeal.
• The NZD sustains gains as markets price in future economic recovery.
• New Zealand's solid domestic outlook reduces vulnerability to global shocks.
• NZD strengthens despite commodity market fluctuations and oil price instability.
• Positioning adjustments in forex markets favor NZD as a hedge.
• NZD remains one of the best-performing undollars in a volatile currency landscape.

News summary

EURUSD

• The EURUSD pair is poised to remain under sustained downward pressure due to diverging economic trajectories between the Eurozone and the United States. The U.S. economy continues to exhibit resilience, evidenced by strong GDP growth of 2.8% in Q3, robust labor market data with jobless claims at 213K, and rising Treasury yields that support the dollar. In contrast, the Eurozone faces sluggish growth, declining inflation, and heightened political instability, with the ECB signaling a dovish stance that includes potential rate cuts. Additionally, the USD benefits from a cautious rebound supported by geopolitical risk hedging and optimism around domestic economic data, including durable goods orders exceeding expectations. Eurozone vulnerability to U.S. trade policies and fiscal tensions within member states further weigh on the euro. While temporary volatility caused by geopolitical concerns in the Middle East may create momentary buying opportunities for the EUR, the broader macroeconomic outlook strongly favors the USD. Consequently, EURUSD is expected to trend lower, testing key support levels, with a potential to fall below the 1.05 mark in the near term.

USDCAD

• The USDCAD pair is expected to trade within a constrained range, with a slight upward bias favoring the USD due to the relative strength of the U.S. economy. The USD benefits from strong economic fundamentals, including robust GDP growth, solid labor market data, and rising Treasury yields, which provide underlying support for the greenback. Additionally, geopolitical tensions in the Middle East and uncertainty around global trade lend further demand to the USD as a safe haven. Conversely, CAD faces challenges from trade-related uncertainties and Canada’s reliance on U.S. economic conditions, which remain vulnerable to tariff policies and potential fiscal tightening. Despite CAD finding some support from oil price stability, its outlook remains clouded by risks of a U.S.-induced recession. Market expectations for gradual Fed rate cuts may cap significant USD gains, keeping the pair’s upward trajectory modest. In this context, USDCAD is likely to trade within a tight range, with the USD retaining a slight edge over the CAD.

AUDUSD

• The AUDUSD pair is likely to remain under significant pressure as the Australian dollar struggles against a broadly stronger U.S. dollar. The USD’s strength is underpinned by positive labor market data, robust economic growth, and rising Treasury yields, all of which reinforce investor confidence in the greenback. In contrast, the AUD faces persistent headwinds, including weak consumer price inflation, slowing industrial metal demand, and heightened vulnerabilities tied to trade tensions with China and the U.S. Additionally, the Reserve Bank of Australia’s reluctance to take immediate monetary policy action until early next year further dampens sentiment for the AUD. Global risk aversion, particularly in commodity markets such as copper and oil, exacerbates bearish pressures. Given these factors, AUDUSD is likely to remain volatile with a bearish bias, potentially breaking below critical support levels near the 64-cent handle in the near term.

AUDNZD

• The AUDNZD pair is likely to weaken further as the New Zealand dollar benefits from proactive monetary policy measures by the Reserve Bank of New Zealand (RBNZ). The RBNZ’s recent 50-basis-point rate cut, accompanied by dovish forward guidance, has bolstered market confidence in the NZD, contrasting with the RBA's more cautious approach. Weak consumer sentiment in Australia, combined with declining industrial metal demand and the impact of China’s trade slowdown, exacerbates bearish sentiment for the AUD. The NZD’s strength is further supported by its resilience to global trade volatility and a more stable domestic economic outlook, reducing its vulnerability to external shocks. These factors collectively position AUDNZD for continued bearish momentum, with the pair likely to test support levels below 1.11 in the coming weeks.

EURGBP

• EURGBP is anticipated to continue its downward trajectory, reflecting the stark contrast between the economic outlooks of the Eurozone and the United Kingdom. The GBP is underpinned by resilient inflationary pressures, stronger labor market fundamentals, and comparatively robust growth prospects. In contrast, the euro struggles under the weight of a slowing economy, dovish ECB policy signaling, and heightened vulnerability to U.S. tariff policies. Brexit-era resilience and the UK’s stable fiscal and monetary environment further enhance GBP's relative appeal against the EUR. Political instability in the Eurozone, alongside deteriorating growth expectations, adds to EUR’s bearish positioning. As the ECB prepares for further easing measures while the Bank of England maintains a more stable outlook, EURGBP is expected to trend lower, potentially approaching multi-year lows around the 0.83 level.

AUDCAD

• AUDCAD is likely to exhibit a bearish bias, driven by contrasting fundamentals between the Australian and Canadian economies. The AUD remains under pressure due to Australia’s weak consumer price inflation, slowing economic resilience, and vulnerability to global trade tensions, particularly with China. Furthermore, the Reserve Bank of Australia’s (RBA) reluctance to act on monetary policy until early next year adds to bearish sentiment surrounding the AUD. In contrast, the Canadian dollar finds moderate support from oil market adjustments and temporary geopolitical risks, such as tensions in the Middle East. However, CAD's upside is limited by concerns over Canada's reliance on U.S. trade and the potential for a U.S.-driven recession in 2025. The outlook for AUD is further dampened by declining industrial metal demand, a critical export sector for Australia. As the divergence in monetary policy and economic sentiment persists, AUDCAD is expected to remain under downward pressure, with CAD likely to outperform AUD in the medium term, potentially targeting lower support levels.

NZDCAD

• NZDCAD is positioned for continued upward momentum as the New Zealand dollar outpaces the Canadian dollar, driven by stronger economic fundamentals and proactive monetary policy in New Zealand. The RBNZ’s decisive 50-basis-point rate cut has enhanced investor confidence in the NZD, particularly as guidance indicates further potential easing to manage inflation effectively. In contrast, the Canadian dollar remains hampered by trade-related uncertainties and overreliance on oil prices, which remain subject to volatility. Additionally, Canada’s export-driven economy faces broader risks from U.S. fiscal policies and potential recessionary pressures in 2025. The relative stability of short-term interest rates in New Zealand further increases the NZD’s attractiveness, providing a robust foundation for its continued outperformance. Against this backdrop, NZDCAD is expected to maintain its upward trajectory, with the NZD outperforming CAD in the near to medium term.

Daily Analysis 2024/11/25

25. 11. 2024 - Josef Brynda

Latest news

USD

• The yield on the US 10-year Treasury note fell by about 11 basis points to 4.3% on Monday after President-elect Donald Trump nominated hedge fund manager Scott Bessent for Treasury Secretary, a move that brought a sense of stability to investors.
• The dollar index fell 0.8%, the most in 2 weeks to below 107 on Monday, retreating from two-year highs after US President-elect Donald Trump nominated hedge fund manager Scott Bessent for Treasury Secretary, providing a sense of stability to investors.
• The market’s focus shifts to FOMC minutes and PCE inflation later this week, key for USD direction.
• Strong US PMI data last week reinforced resilience in the services sector, supporting USD demand.
• Upcoming Black Friday shopping data may highlight consumer strength and influence the Fed's inflation outlook.
• US 2-year Treasury auction today (1800 GMT) could impact short-term USD volatility.
• Expectations of inflation risks from anticipated Republican fiscal and trade policies added to concerns, influencing dollar strength amid mixed bond market movements.
• Markets are pricing in reduced chances for a Federal Reserve rate cut in December, with probabilities dropping to 56% from 62% a week ago.
• US2000 increased to an all-time high of 2459.00 Index Points.
• The Dallas Fed's Texas manufacturing activity index improved slightly to -2.7 in November 2024, from -3 in October, nearing forecasts of -2.4. 
• The Chicago Fed National Activity Index decreased to -0.40 in October 2024, the lowest in nine months, from -0.27 in September and much worse than market forecasts of -0.20.
• The University of Michigan consumer sentiment index for November was revised down to 71.8 from an initial 73, but it remains the highest in seven months, reflecting improved consumer confidence compared to October's 70.5.
• The S&P Global US Composite PMI rose to 55.3 in November from 54.1 in October, indicating robust expansion in the private sector and marking the strongest growth since April 2022.

CAD

• CAD gained modestly as crude oil prices stabilized after recent geopolitical developments in the Middle East.
• The Canadian dollar started the week with small gains, trading at 1.3958 against the US dollar, down 0.15% on the day.
• Canada’s retail sales increased by 0.7% year-on-year in October, following a 0.4% rise in September, signaling strong consumer demand.
• In the third quarter, retail sales grew by 0.9%, marking a significant recovery after a contraction in the first half of the year.
• The Bank of Canada’s aggressive interest rate cuts, totaling 1.25% since June, have boosted consumer spending.
• At the next meeting on December 11, the Bank of Canada is expected to cut rates by another 25 basis points, reflecting continued monetary easing.
• Inflation in October unexpectedly rose from 1.6% to 2%, indicating stronger price pressures and influencing the size of the planned rate cut.
• A temporary sales tax removal from December 2024 to February 2025 could delay consumer spending in November, potentially impacting the Canadian dollar.
• Weak US Manufacturing PMI, below the growth threshold for the fifth consecutive month, signals economic challenges for Canada’s largest trading partner.
• Strong US Services PMI at 57.0 could support US dollar strength, potentially pressuring the Canadian dollar.
• With no major economic events from Canada or the US, the Canadian dollar is expected to experience limited volatility today.
• Trump's Treasury pick, seen as more moderate on tariffs, supports CAD via reduced US-China trade tension risks.
• Expectations of Bank of Canada holding rates steady continue to anchor CAD sentiment.

EUR

• European services PMI data came in broadly lower than expected, with Germany's November services PMI at 49.4 (vs. 51.7 est), France's at 45.7 (vs. 49 est), and the Euro-area's at 49.2 (vs. 51.6 est), pointing to contraction in private sector activity.
• The IFO Business Climate Survey for November in Germany will provide further insight into the economic sentiment and growth outlook in the Eurozone's largest economy.
• Weak Eurozone business activity data prompted traders to price in earlier rate cuts from the ECB, with markets now anticipating 37 basis points of cuts for next month.
• Eurozone CPI data later this week will play a crucial role in shaping expectations for ECB policy direction.
• ECB Chief Economist Philip Lane is scheduled to speak, which could offer further clarity on the central bank’s policy stance and inflation outlook.
• The euro traded lower last week, briefly falling below 1.0350 against the US dollar after weak PMI data, though weekend news triggered a gap higher to touch 1.0500.
• Stronger-than-expected US PMI data last week suggested resilience in the US services sector, leading to rising US yields, which may pressure the euro in the near term.
• Eurozone bond yields dropped last week, with the German 2-year yield falling 12 basis points to 1.99%, as traders adjusted expectations for ECB monetary easing.
• Preliminary November services PMI data highlighted a broad-based contraction in the Eurozone, suggesting potential headwinds for the euro as economic sentiment weakens.
• Increased geopolitical uncertainty and Eurozone growth concerns are likely to keep the euro volatile, particularly against currencies like the USD and CHF.

GBP

• GBP remains steady amid mixed sentiment over upcoming Bank of England rate decisions.
• The weak eurozone PMIs offer mild support to EURGBP as the UK shows comparatively stable economic indicators.
• If Bessent and Trump negotiate moderate trade deals with China and Europe, it could stabilize global markets, benefiting GBP through reduced risk aversion.
• Continued Brexit-related trade challenges keep GBPUSD gains in check despite USD weakness.
• Market participants monitor the UK’s Black Friday sales data to assess consumer strength.
• Anticipation of dovish ECB commentary may boost GBP against the euro.
• The UK PMI release showed a sharp deterioration in business sentiment, weakening the GBP due to economic concerns.
• Businesses in the UK are cutting hiring plans following increased tax burdens, adding pressure to the Pound.
• Rising unemployment in the UK could prompt the Bank of England to cut interest rates, potentially weighing further on the GBP.
• Input prices, particularly in the services sector, have started to firm as businesses adjust to the government’s budget implications, signaling inflationary pressures.
• The UK’s “tax on jobs” through increased national insurance has made hiring and retaining staff more expensive, negatively impacting the Pound.
• HSBC Holdings increased to a 6-year high of 732.15 GBp
• The British pound gained some ground to approach $1.26, buoyed by a weakening dollar after Donald Trump announced his intention to nominate hedge fund manager Scott Bessent as Treasury Secretary.

AUD

• Markets reacted positively to the appointment of Scott Bessent as US Treasury Secretary, boosting investor sentiment globally and strengthening the AUD.
• AUDNZD hit 2-year highs above 1.1150 as optimism over reduced tariff risks boosted the Australian economy.
• Crude oil's decline may limit further AUD upside due to Australia's resource dependency.
• AUDUSD showed resilience, bolstered by higher industrial metal prices and easing US yields.
• Market focus on RBA commentary regarding global growth and China trade dynamics this week.
• The ASX 200 index closed above 8400 points for the first time, signaling strong investor confidence in the Australian economy.
• The Australian dollar rose 0.8% to a two-week high of US66.50c as the US dollar weakened significantly against major currencies.
• Expectations of further interest rate cuts supported a 1.59% gain in the A-REIT sector, indicating potential economic stimulus.
• APRA's decision to maintain the 3% minimum mortgage serviceability buffer highlights stability in Australia's financial policy amid rising cost-of-living pressures.
• Broad market gains across seven of eleven sectors in the Australian market reflect robust economic conditions, supporting the AUD.
• Zip Co and Guzman Y Gomez stocks surged 4.36% and 4.27%, respectively, driven by positive market sentiment, reflecting strong consumer and business confidence.
• The easing of Middle East tensions, with a potential Israel-Hezbollah ceasefire, reduced geopolitical risk, weighing on safe-haven assets and indirectly benefiting riskier currencies like the AUD.
• The decline in gold prices, a typical hedge against economic uncertainty, negatively affects the AUD.

NZD

• AUDNZD strength challenges NZD amid anticipation of Wednesday's RBNZ meeting, with some forecasting a sharp 75 bps rate cut.
• The New Zealand dollar is forecasted to weaken by around 6% in the coming months due to a slowing economy and expectations of aggressive interest rate cuts.
• Financial markets are pricing in a one-in-five chance of a 0.75% rate cut by the Reserve Bank of New Zealand (RBNZ) on November 27, which would bring the cash rate to 4%
• Weak NZ dairy auction results could dampen NZD performance further in the short term.
• The RBNZ is fully expected to implement a 0.5% rate cut next week, potentially bringing New Zealand's rate below Australia’s for the first time since 2013, excluding the March 2020 pandemic period.
• Since August, the RBNZ has reduced its policy rate by 75 basis points over two meetings as the economy continues to contract.
• New Zealand’s GDP per capita has declined for the seventh consecutive quarter, indicating prolonged economic challenges.
• The US dollar's strength, supported by expectations of a gradual interest rate cut path by the Federal Reserve, continues to weigh heavily on the NZD.
• Strong US economic data, including S&P PMI figures, reinforce the USD’s relative strength, keeping the NZD under pressure.
• Geopolitical instability contributed to a temporary decline in the US Dollar Index (DXY) on Friday, although it remains near two-year highs, limiting NZD recovery.
• Upcoming Federal Reserve meeting minutes and US inflation data, particularly the Core PCE Price Index, are expected to further influence NZD/USD dynamics next
• Expectations of milder US tariffs provide slight support to NZD, given New Zealand's trade exposure to China.

News summary

EURUSD

• The EURUSD pair is poised for volatility, with the euro under pressure due to a broad-based contraction in Eurozone services PMI data, particularly in Germany and France, signaling economic weakness. Additionally, expectations of a dovish ECB, with markets now pricing in 37 basis points of rate cuts next month, further weigh on the euro. On the US side, strong S&P Composite PMI data indicating robust private sector growth, coupled with a reduced probability of a Federal Reserve rate cut in December (now at 56% from 62%), strengthen the USD. The upcoming PCE inflation data and FOMC minutes will be critical, with signs of inflation risks from anticipated fiscal policies adding to USD resilience. The divergence in monetary policy outlooks and economic performance sets the stage for further downside in EURUSD, potentially revisiting and breaking below 1.0350.

USDCAD

• The USDCAD pair is navigating mixed signals, with the USD facing pressure following the nomination of Scott Bessent as Treasury Secretary, which led to a decline in the dollar index by 0.8%, the steepest drop in two weeks. This reaction reflects market expectations of a more moderate fiscal approach and reduced trade tensions, which have softened demand for the USD as a safe-haven asset. Conversely, the CAD finds stability in crude oil prices and strong retail sales but faces headwinds from soft US manufacturing PMI data and anticipated monetary easing by the Bank of Canada. The upcoming Canadian rate decision, where another 25 basis point cut is likely, could further weaken CAD. However, unless crude oil prices experience a significant rally, USDCAD may still trend higher, albeit with a more tempered upward trajectory.

AUDUSD

• The AUDUSD pair exhibits potential for short-term gains but faces long-term uncertainty. The Australian dollar is buoyed by strong industrial metal prices, easing geopolitical risks, and positive sentiment from domestic markets, with the ASX 200 reaching record highs. Furthermore, optimism surrounding reduced US-China trade tensions under Trump’s Treasury pick adds a tailwind for risk-sensitive currencies like the AUD. However, the USD’s underlying strength, driven by robust PMI data and reduced expectations of a Fed rate cut, limits AUDUSD’s upward potential. Upcoming US PCE inflation data and FOMC minutes will likely determine the USD’s trajectory, potentially capping gains in AUDUSD. Nonetheless, in the near term, the pair could test resistance levels near 0.67.

AUDNZD

• The AUDNZD pair is primed for further upside as the Australian dollar remains bolstered by favorable external conditions and resilient domestic indicators. The easing of geopolitical tensions and strong performance in industrial metals lend support to the AUD, while the NZD faces significant headwinds. Expectations of a sharp 50-75 basis point rate cut at the upcoming RBNZ meeting are weighing heavily on the NZD, exacerbated by a slowing economy, seven consecutive quarters of declining GDP per capita, and weak dairy auction results. Moreover, the potential for New Zealand’s policy rate to fall below Australia's for the first time since 2013 (excluding the pandemic) highlights the divergence in monetary policy. This divergence, alongside Australia's relative economic strength, sets the stage for continued gains in AUDNZD.

EURGBP

• The EURGBP exchange rate is caught between the eurozone’s economic struggles and the UK’s own challenges. Eurozone services PMI data pointed to contraction across major economies, fueling speculation of ECB monetary easing. Meanwhile, bond yields in the region have dropped, with the German 2-year yield falling by 12 basis points to 1.99%. On the GBP side, weak UK PMI results and concerns over rising unemployment, compounded by increased tax burdens such as the National Insurance hike, limit the pound's upward potential. However, comparatively stable UK economic indicators and reduced risk aversion due to potential moderate trade deals under Trump’s Treasury pick provide mild support for GBP. The net effect may see EURGBP maintaining a slightly bearish tone as the euro's weakness outweighs UK-specific challenges.

AUDCAD

• The AUDCAD pair reflects a nuanced interplay between domestic and external factors. The Australian dollar gains support from rising industrial metal prices, improved investor sentiment, and easing US bond yields, which have bolstered risk appetite. Additionally, the ASX 200 reaching record highs signals strong economic confidence. In contrast, while the Canadian dollar finds support from stable crude oil prices and solid retail sales growth (+0.7% year-on-year), these gains are tempered by expectations of further rate cuts by the Bank of Canada, with markets forecasting a 25 basis point cut in December. The temporary removal of sales tax in Canada may also delay consumer spending, adding a potential drag. With Australia's broader economic momentum and a more stable outlook relative to Canada's monetary easing, AUDCAD is likely to trend higher in the short to medium term.

NZDCAD

• The NZDCAD pair is likely to remain under bearish pressure, as the New Zealand dollar grapples with a weaker economic outlook and aggressive monetary easing by the RBNZ. With markets pricing in a 50-75 basis point cut and GDP per capita continuing to decline, the NZD lacks the fundamental support needed for a recovery. Meanwhile, the CAD benefits from stable crude oil prices and stronger-than-expected retail sales but remains vulnerable to its own challenges, including an anticipated rate cut by the Bank of Canada. Despite these headwinds for CAD, the scale of New Zealand’s economic struggles and monetary easing suggests that NZDCAD will trend lower, particularly as Canada’s energy-driven economy shows relative resilience.

Daily Analysis 2024/11/21

21. 11. 2024 - Josef Brynda

Latest news

USD

• USD remains within range but supported by rising US Treasury yields, with the 10-year yield finishing at 4.44%.
• Geopolitical tensions, including potential Ukraine-Russia ceasefire talks and missile strikes, contribute to risk aversion, boosting USD.
• Market expectations for a Federal Reserve rate cut in December have dropped to 54%, down from 82.5% a week ago, driven by inflation risks from Trump's proposed policies.
• Fed Governor Bowman's hawkish remarks emphasize the need for cautious rate cuts, keeping USD sentiment resilient.
• USD - Continuing Jobless Claims: Claims rose to 1.908M, higher than the previous 1.872M, signaling potential weakness in the labor market.
• USD - Initial Jobless Claims: Claims decreased to 213K, better than the forecast of 220K, suggesting a stronger labor market.
• USD - Philadelphia Fed Manufacturing Index (November): Fell to -5.5 from a forecast of 6.3, indicating a contraction in manufacturing activity.
• USD - Philly Fed Employment (November): Increased significantly to 8.6, recovering from the previous -2.2, showing improvement in employment metrics
• Traders await clarity on U.S. President-elect Donald Trump's policies, including trade tariffs and tax cuts, which could reignite inflation and limit the Fed's ability to cut rates.
• Economists expect the Fed to cut rates at its December meeting but at a slower pace in 2025 due to inflation concerns from Trump's policies.
• Uncertainty surrounds the potential impact of Trump's proposed tariffs on major economies like Europe and China, increasing caution in global markets.
• The dollar index rose 0.1% to 106.72, near its one-year high of 107.07, supported by expectations of higher U.S. interest rates.
• Bitcoin reached a record high of $97,902 on speculation of an easier regulatory environment under Trump and a report that Trump's social media company may acquire crypto trading firm Bakkt.

CAD

• The CAD is gaining from strong natural gas prices, which surged to a 10-month high amid cold weather and rising exports.
• Oil prices remain a key focus for CAD, with crude stuck near the range low as concerns about Chinese demand weigh on the market.
• US economic data releases, such as initial jobless claims and home sales, are expected to impact CAD via USD/CAD movement.
• CAD - RMPI (MoM, October): Rose sharply by 3.8%, exceeding the expected -1.5% and reflecting higher raw material input costs.
• Rising US Treasury yields and a broadly stronger USD weigh on CAD sentiment, despite resilient energy prices.
• The Bank of Canada remains in focus, with inflationary pressures globally potentially influencing its rate policy stance.
• Canada’s inflation rate increased to 2% in October, reducing the likelihood of a larger interest rate cut by the Bank of Canada in December.
• The re-acceleration of inflation from 1.6% in September was primarily driven by a smaller decline in gasoline prices, according to Statistics Canada.
• Core inflation measures exceeded expectations, leading markets to trim the probability of a 50-basis-point rate cut to 31%.
• The Bank of Canada anticipated the inflation uptick, citing a smaller drag from energy prices in its monetary policy forecast.
• Market analysts now lean toward a smaller 25-basis-point rate cut, with economists citing stronger-than-expected inflation and signs of economic resilience.
• Weakness in the Canadian dollar ("limping loonie") persists, creating additional considerations for the Bank of Canada as it assesses monetary policy adjustments.

EUR

• The STOXX 50 was down 0.2% and the STOXX 600 declined 0.1% on Thursday and are on track to book a fifth straight session of losses, as cautious sentiment returned amind earnings results and escalation in the Russia-Ukraine conflict.
• European equity markets were set to open higher on Thursday, as investor sentiment stabilized following four consecutive days of selling.
• The Euro fell to $1.052, the lowest level since mid-October 2023, pressured by a general dollar strength, mounting tensions between Russia and Ukraine, and growing concerns about downside risks to the Eurozone economy.
• EUR/USD remains under pressure, with the pair struggling above the psychological support of 1.0500 due to concerns about Eurozone growth and expectations of an accelerated ECB easing cycle.
• Market participants anticipate the ECB to cut its Deposit Facility Rate by 25 bps to 3% in December and move toward a neutral rate range in 2025.
• ECB policymakers express concern over downside risks to Eurozone growth and inflation, advocating for further reductions in monetary policy tightness.
• ECB Governor François Villeroy de Galhau emphasized the need for cautious and flexible rate adjustments, reflecting concerns over Eurozone growth without significant inflationary impact from US tariffs.

GBP

• Rising UK gilt yields failed to support sterling, with long-dated yields closing higher at 4.47%.
• Weakness in industrial metals and tariffs on exports could weigh on GBP due to its trade exposure.
• Political uncertainty in France adds indirect pressure on GBP as it impacts the broader European outlook.
• Higher-than-expected inflation reduced the likelihood of a December rate cut, with markets now pricing in only 60 bps of rate cuts by the end of 2025.
• UK monthly inflation (CPI MoM) for October rose to 0.6%, up from 0.0%, signaling rising price pressures that could impact Bank of England decisions.
• Annual inflation (CPI YoY) climbed to 2.3% in October, above expectations of 2.2% and the previous 1.7%, highlighting growing inflation concerns.
• Producer prices (PPI Input MoM) increased by 0.1%, below forecasts of 0.5%, but improved from -0.5%, suggesting reduced but persistent cost pressures.
• Electricity prices increased by 7.7% and gas prices rose by 11.7% in October, following the lifting of Ofgem's energy price cap, reversing declines seen in the same period last year.
• October's Budget fiscal measures are expected to keep inflation above the 2% target for longer, adding to upward price pressures.
• UK economic growth has stalled since the election, and the combination of high inflation and fiscal tightening could lead to stagflation.
• The Bank of England is likely to hold interest rates steady next week, with Governor Andrew Bailey highlighting concerns over inflationary pressures from job taxes and business costs.
• Almost half (46%) of CPI items saw price increases above 3%, a level historically inconsistent with stable 2% inflation, complicating monetary policy decisions.
•  Despite economic challenges, the British Pound remains one of 2024’s best-performing G10 currencies, supported by inflation surprises and cautious rate adjustments.

AUD

• The S&P/ASX 200 Index inched down 0.04% to close at 8,323 on Thursday, reversing earlier gains and tracking global markets lower.
• The Australian dollar rose back above $0.65 on Thursday, recovering from losses in the previous session, driven by a hawkish stance from the Reserve Bank of Australia.
• AUD remains under pressure as Chinese stimulus expectations falter after the PBoC held rates steady, dimming hopes for a boost to Australian exports.
• Industrial metals, key to Australia's exports, remain weighed down by global demand concerns tied to potential US tariffs.
• Gold’s rally amidst geopolitical tensions could lend some support to AUD due to Australia's status as a major gold exporter.
• AUD weakened on risk-off sentiment fueled by escalating geopolitical concerns around Ukraine and Russia.
• Australian superannuation funds have delivered a 10.3% growth year-to-date in 2024, benefiting millions of Australians and contributing positively to economic sentiment.
• The "Trump Trade" rally following the US elections has bolstered global share markets, positively impacting Australian superannuation fund returns and boosting the AUD's attractiveness.
• Strong global share markets, combined with favorable conditions for Australian unhedged assets, underline the interconnected nature of the AUD's performance.
• While the Australian market fell 1.3% and international shares dropped 0.9%, the AUD's depreciation provided a cushion, demonstrating the currency's role in stabilizing economic returns.

NZD

• The New Zealand dollar resumed its downturn, falling below US$0.59 as global risk-off sentiment influenced markets.
• Reports of escalating military action between Ukraine and Russia have heightened geopolitical tensions, driving demand for safe-haven assets and pressuring the NZD lower.
• Reports of escalating military action between Ukraine and Russia have heightened geopolitical tensions, driving demand for safe-haven assets and pressuring the NZD lower.
• US political developments, including Donald Trump's appointment of Howard Lutnick as commerce secretary, have raised fears of aggressive tariff policies, weighing on the NZD.
• Weakness in the Chinese yuan, which marked fresh lows since mid-July, has spilled over into the NZD, adding downward pressure
• The USD advanced amid a broader risk-off environment, benefiting from safe-haven demand and further weakening the NZD.
• Persistent strength in US Treasury yields, trading between 4.39% and 4.44%, has supported the USD, indirectly influencing the NZD's decline.
• New Zealand's inflation data and any dovish rhetoric from the RBNZ could further weigh on NZD in the near term
• The USD's broad rebound limits NZD gains despite some support from rising dairy prices.
• Weakness in global commodity demand, particularly in China, dampens NZD prospects as a commodity-linked currency.

News summary

EURUSD

• The EUR/USD pair is likely to remain under pressure as USD strength is reinforced by rising U.S. Treasury yields, with the 10-year yield finishing at 4.44%, and a drop in expectations for a Federal Reserve rate cut in December to 54%, down from 82.5% a week ago. Hawkish remarks from Fed Governor Bowman highlight caution on rate cuts, supporting the USD further. On the other hand, the Euro faces significant headwinds, with EUR/USD falling to $1.052, the lowest since mid-October, due to geopolitical tensions surrounding Russia-Ukraine, weak Eurozone economic prospects, and expectations for the ECB to cut its Deposit Facility Rate by 25 bps to 3% in December. Additionally, poor performance in European equity markets, with STOXX indices posting losses, reflects growing concerns over Eurozone growth. With the dollar index near its one-year high and ECB policymakers advocating for more monetary easing, EUR/USD is likely to test and potentially breach the psychological support of 1.0500 in the short term.

USDCAD

• USD/CAD is expected to continue its upward trajectory, supported by strong USD fundamentals, including rising U.S. Treasury yields, robust labor market data (e.g., initial jobless claims bettering forecasts at 213K), and geopolitical tensions driving safe-haven demand. Although CAD gains some support from resilient energy prices and strong inflation data, with Canada’s inflation rate climbing to 2% in October, the broader strength of the USD outweighs these factors. Market expectations for tempered Fed rate cuts and potential policy caution from the Bank of Canada further amplify USD's edge over CAD. With the dollar index near its one-year high, USD/CAD could test higher resistance levels. But we could see a little support for the Canadian dollar in the short term.

AUDUSD

• The AUD/USD pair is likely to face further downward pressure as the USD remains supported by rising U.S. Treasury yields, safe-haven demand, and robust economic data. Geopolitical tensions, particularly around Ukraine and Russia, add to the USD's strength. Although AUD sees some support from gold's rally and the RBA's hawkish stance, it is weighed down by weaker industrial metal prices and faltering Chinese stimulus expectations. The broader risk-off sentiment and the USD's resilience near its one-year high further dampen AUD's prospects. AUD/USD may continue to decline, potentially testing lower support levels as USD strength prevails.
•  

AUDNZD

• AUD/NZD is likely to rise as AUD benefits from gold's rally amidst geopolitical tensions, driven by Australia's position as a major gold exporter, and a hawkish stance from the RBA. On the other hand, the NZD faces significant headwinds due to escalating global risk-off sentiment, rising U.S. Treasury yields, and a weaker Chinese yuan, which adds pressure to the commodity-linked NZD. While rising dairy prices provide some support to the NZD, expectations of dovish rhetoric from the RBNZ, combined with weakness in global demand for commodities, particularly from China, amplify the divergence between the two currencies. With these contrasting factors, AUD is likely to outperform NZD, pushing AUD/NZD higher.

EURGBP

• EUR/GBP is expected to decline as the Euro remains under pressure due to mounting downside risks to Eurozone growth, poor manufacturing activity, and expectations of an ECB rate cut in December. In contrast, GBP remains resilient, supported by stronger-than-expected UK inflation data, with CPI (YoY) rising to 2.3% in October, above the forecast of 2.2%, and a reduced likelihood of a Bank of England rate cut. UK fiscal measures, such as the removal of the Ofgem energy cap, have driven electricity and gas prices higher, maintaining inflation above 2%. Despite the broader European outlook being weighed down by geopolitical tensions and weak industrial activity, the pound remains buoyed by cautious but hawkish BoE sentiment. With EUR weakened by its dovish ECB outlook and GBP gaining from inflation surprises, EUR/GBP is likely to trend lower.

AUDCAD

• The AUD/CAD pair is likely to trade with a bearish bias as CAD benefits from strong natural gas prices, which surged to a 10-month high amid cold weather and rising exports, alongside resilient inflation data showing a rise to 2% in October. These developments reduce the likelihood of aggressive Bank of Canada rate cuts, with markets now pricing in a smaller 25-bps cut. Conversely, AUD struggles due to weaker industrial metal prices, a result of dampened global demand, and faltering Chinese stimulus expectations after the PBoC held rates steady. Although gold's rally amidst geopolitical tensions and a hawkish stance from the RBA provide some support for AUD, the overall strength of CAD, driven by robust energy prices and moderated inflation expectations, is likely to dominate, keeping AUD/CAD on a downward trajectory.

NZDCAD

• NZD/CAD is poised to decline as NZD weakness dominates, pressured by heightened geopolitical tensions, global risk-off sentiment, and the spillover effect of a weak Chinese yuan. Rising U.S. Treasury yields and safe-haven demand for the USD exacerbate NZD's struggles. Meanwhile, CAD benefits from strong natural gas prices and resilient inflation data, reducing the likelihood of aggressive rate cuts by the Bank of Canada. With the Canadian economy demonstrating resilience and commodity prices like crude oil providing additional support, CAD strength is expected to outweigh the NZD, pushing NZD/CAD lower.

Daily Analysis 2024/11/18

18. 11. 2024 - Josef Brynda

Latest news

USD

• Rising US Treasury yields, with the 10-year hitting 4.5%, highlighted strong economic data and hawkish Fed sentiment.
• Geopolitical concerns, including US support for Ukraine and North Korean troop involvement, drove USD safe-haven flows.
• U.S. retail sales in October grew 0.4%, surpassing forecasts.
• Volatility in equity markets, reflected in a 12% jump in VIX, sustained demand for the dollar as a safe-haven currency.
• Diverging economic data between the US and other major economies, particularly Canada and Europe, boosted USD strength.
• The U.S. Dollar Index reached its one-year high at 106.72 before slightly dropping to 106.497. This trend indicates the USD's sustained strength in the market.
• Since early November, following Donald Trump's election, the USD has experienced a structural bullish shift driven by broader macroeconomic optimism and political factors.
• Inflation in the U.S. continues to exceed the Federal Reserve's targets, supporting expectations of tighter monetary policy, which historically strengthens the USD.
• Fed Chair Jerome Powell recently emphasized caution regarding future monetary easing, reinforcing investor confidence in maintaining higher interest rates for an extended period.
• Differences in monetary policy between the Fed and other G10 central banks, which are generally more dovish, increase the USD's attractiveness.
• Futures markets now predict only 77 basis points of Fed rate cuts by the end of 2025, down from over 100 basis points previously. This reduction in easing expectations supports the strong USD.
• At least seven Fed officials are scheduled to speak this week, with expectations of cautious remarks. Even dovish members are unlikely to signal aggressive rate cuts, providing further support for the USD.
• Markets now see only a 60% probability of a quarter-point Fed rate cut in December, maintaining uncertainty around monetary easing and bolstering the USD.
• The U.S. dollar has recorded gains in six of the last seven weeks, highlighting its appeal as a safe-haven asset during periods of global economic uncertainty.
• Analysts expect any short-term weakening of the USD to be temporary, as the market lacks new economic data that could alter the current support for the currency.
• The S&P 500 and Nasdaq recorded their largest weekly declines since September, reflecting reduced risk appetite in global markets.

CAD

• USDCAD surged to multi-year highs above 1.4000, driven by diverging US-Canada economic data.
• Crude oil prices remained under pressure amid ample supply forecasts into 2025, further weakening CAD.
• Hawkish Fed sentiment and robust US retail sales data fueled USD strength, exacerbating CAD's decline.
• Softer Canadian economic outlook contrasted with the US, pushing traders toward USD over CAD.
• BoJ-related yen strength highlighted CAD’s lack of momentum against safer currencies, reflecting market uncertainty.
• The postal strike involving 55,000 workers could disrupt mail delivery during the critical holiday season, impacting e-commerce and business operations. This may dampen economic activity and weaken the CAD if prolonged.
• October housing starts data, following September's increase to 223,808 units, could indicate continued strength in the housing market. A strong report would support the CAD by highlighting resilience in this key sector.
• October's CPI release will be crucial after September's inflation slowed to 1.6%, below the Bank of Canada’s 2% target.
• Unifor’s strike vote for 3,500 Canadian National Railway workers could disrupt commodity and goods transportation. This would negatively affect exports and economic output.
• Metro Inc.'s earnings and expansion of its rewards program into Ontario could reflect consumer spending trends. 
• Government intervention in labour disputes, like those at B.C. and Montreal ports, indicates a focus on economic stability. Similar actions in the postal or rail disputes could stabilize markets and support the CAD.
• A rail strike would impact key Canadian exports like oil, lumber, and agriculture. This could harm the trade balance.
• Slowing inflation, as seen in September, could signal weaker consumer spending power and softer economic growth. 
• The federal government's proactive stance on labour disputes could reduce long-term economic disruptions. This stability might lend moderate support to the CAD in the future.
•  

EUR

• Multiple ECB speakers hinted at cautious policy moves, limiting euro strength despite dollar softness late last week.
• Stoxx 600 losses and weak UK GDP data weighed on regional confidence, indirectly pressuring the euro.
• Declining rate-cut expectations in Europe reflected persistent economic challenges, keeping EURUSD in check.
• Strong US retail sales and Empire Manufacturing data underscored economic divergence between the US and Eurozone.
• Geopolitical concerns surrounding Ukraine limited EUR gains, reflecting cautious investor sentiment.
• The EUR/USD traded 0.3% higher to 1.0568, reflecting positive market sentiment ahead of speeches from European Central Bank (ECB) officials.
• ECB President Christine Lagarde, along with other officials, is expected to adopt a dovish tone, influencing the euro's movement.
• Preliminary figures for October showed the eurozone economy grew 0.4% in the third quarter, surprising market watchers but still highlighting economic fragility.
• Germany, the eurozone's largest economy, remains particularly weak, adding pressure to the euro.
• The risk of tariffs impacting EU trade has resurfaced after Donald Trump’s election as U.S. President, which could weigh on the euro.
• The release of eurozone PMI activity data this week will be a key indicator for traders, reflecting broader economic trends.
• PMIs have gained significance as the ECB shifts focus from inflation to growth, with soft activity data now carrying more weight in policymaking.
• The ECB's ongoing dovish stance could signal further monetary easing, potentially impacting the euro’s valuation.
• Weakness in inflation and economic growth supports a narrative of continued eurozone vulnerability, weighing on the currency.
• Any unexpected changes in market sentiment following ECB speeches or data releases could lead to heightened EUR volatility.

GBP

• Weak UK GDP growth of +0.1% in Q3 underscored economic challenges, limiting GBP upside.
• Persistent concerns about BoE's policy path kept GBP under pressure, despite global rate volatility.
• Risk aversion in equities and higher volatility in global markets weighed on GBPUSD.
• Strength in US Treasury yields and hawkish Fed commentary widened GBPUSD differentials, pressuring the pair lower.
• Diminished rate-cut expectations for BoE in early 2024 offered limited support to the pound against USD strength.
• The expected rise in UK inflation to 2.2% in October (from 1.7% in September) could strengthen the Pound due to reduced likelihood of an early Bank of England rate cut.
• Stable core inflation at 3.2% indicates persistent price pressures, which could support the value of the Pound.
• Services inflation hovering around 5% year-on-year suggests the Bank of England will remain cautious about cutting rates, which may bolster the Pound.
• Negative impacts from the October budget, including increased employer national insurance contributions, could put downward pressure on the Pound.
• Rising household energy prices could increase inflationary pressures, delaying Bank of England rate cuts and supporting the Pound.
• Increased government spending from the October budget supports short-term UK growth, boosting investor confidence in the Pound.
• Warnings from retail and hospitality sectors about rising costs and potential job losses post-budget signal an economic slowdown, which could negatively affect the Pound.
• Expectations of only four Bank of England rate cuts in 2025 suggest a slower easing trajectory, which supports the Pound.
• Persistently high core inflation beyond 2024 could delay Bank of England rate cuts and strengthen the Pound.
• Recent upward revisions to UK economic forecasts by the Bank of England and the Office for Budget Responsibility improve sentiment around the Pound.

AUD

• Weak Chinese industrial output data pressured AUD due to Australia's trade dependence on China.
• Strong Chinese retail sales provided slight relief to AUD, though overall sentiment remains cautious.
• Commodities downturn, particularly in crude oil, added downward pressure on AUD as resource exports faced challenges.
• Hawkish comments from Fed Chair Powell and rising US Treasury yields widened yield differentials, pressuring AUDUSD lower.
• RBA's lack of significant rate action contrasted with other central banks, limiting AUD's appeal amid global volatility.
• Aussie mortgage holders are in theory the most exposed to interest rates rises in the world, yet there is little evidence of a mortgage cliff, the RBA said.
• Despite 13 rate hikes, Australians have continued to meet mortgage payments, reflecting economic resilience.
• Household savings remain at similar levels as before the pandemic, supporting investor confidence in the AUD.
• Low unemployment and strict banking regulations help maintain household repayment capacity.
• Mortgage arrears remain low and comparable to the US, confirming market stability.
• Major banks report most customers are ahead on repayments, enhancing the banking sector's stability.
• Westpac reported a 10% increase in offset balances, demonstrating household financial discipline.
• Fed Chair Jerome Powell’s stance on keeping US rates higher reduces the relative attractiveness of the AUD.
• Australian uranium stocks rose due to Russia limiting uranium exports to the US.
• Geopolitical tension around uranium has increased demand for Australian supplies.
• The ASX strengthened due to uranium miners, signaling stock market stability.

NZD

• NZD faced pressure from mixed Chinese data, particularly weak industrial output, given New Zealand's trade ties with China.
• Commodity weakness, particularly in dairy, a key export for New Zealand, weighed on NZD performance.
• Hawkish Fed sentiment and rising US yields made NZD less attractive for carry trades.
• Market caution around global growth and demand for safe-haven currencies limited NZD upside.
• Broader risk aversion in financial markets, reflected in higher VIX, negatively impacted the risk-sensitive NZD.
• The NZD/USD exchange rate has stopped its three-day decline during the Asian session, suggesting potential stabilization.
• China's retail sales increased by 4.8% year-over-year in October, exceeding expectations and indicating strong consumer demand in a key trading partner for New Zealand.
• China's industrial production grew by 5.3% year-over-year, demonstrating continued economic growth, which could benefit New Zealand's export-driven economy.
• The release of the BusinessNZ Performance of Services Index could provide further insights into New Zealand's business activity and influence the NZD.
• Statistics New Zealand will publish the latest Producer Price Index (PPI), which could reflect inflationary pressures and impact market expectations for monetary policy.
• The Business NZ Performance of Manufacturing Index dropped to 45.8 in October, the lowest since July 2024, signaling challenges in the manufacturing sector.
• Although China's industrial production rose, it fell slightly short of market expectations, which might limit optimism for New Zealand’s exports..
• The Dow Jones Industrial Average declined by 0.7%, contributing to a broader risk-off sentiment that often weighs on currencies like the NZD.

News summary

EURUSD

• The EURUSD is likely to remain under pressure as the USD benefits from strong retail sales, hawkish Fed sentiment, and geopolitical safe-haven flows. The USD's structural bullish shift, supported by rising Treasury yields and reduced expectations for Fed rate cuts, contrasts with the eurozone’s economic fragility. Weak growth in Germany and dovish signals from the ECB underscore the EUR's vulnerability. While EUR/USD may see short-term relief from slight dollar softness or upbeat ECB commentary, the overall divergence in economic performance and monetary policy between the U.S. and eurozone suggests a bearish outlook for EURUSD.

USDCAD

• USDCAD is expected to trend higher as the USD capitalizes on strong retail sales, hawkish Fed commentary, and safe-haven demand, while CAD struggles with weak economic data and falling crude oil prices. Labor disputes in Canada and softer inflation exacerbate CAD’s weakness, while the U.S. Dollar Index remains near one-year highs. Diverging monetary policies and economic fundamentals further favor USD strength. Unless Canada delivers stronger-than-expected housing or CPI data, USDCAD is poised to test higher levels above 1.4000.

AUDUSD

• AUDUSD is poised for further downside as the USD continues to strengthen amid robust economic data, rising Treasury yields, and hawkish Fed sentiment. The AUD faces pressure from weaker Chinese industrial output, declining commodity prices, and the RBA’s dovish stance. While Australia’s housing market and banking resilience provide some economic stability, they are insufficient to counter the USD's appeal as a safe-haven currency. Unless significant upside surprises emerge from Australian data or global risk sentiment shifts, AUDUSD is likely to trend lower in the near term.

   

AUDNZD

• AUDNZD is likely to remain range-bound with a slight bearish bias as both currencies contend with mixed data from China, their primary trading partner. Weak industrial output and commodity performance weigh on AUD, while dairy price pressures and manufacturing challenges impact NZD. However, Australia's economic resilience in housing and low unemployment may provide slight support for AUD, while New Zealand’s softer economic indicators limit NZD strength. In the short term, market risk aversion and broader dollar strength may keep AUDNZD in a narrow range, with a slight tilt towards NZD gains.

EURGBP

• EURGBP may see a modest upside as both currencies face significant challenges, but the euro holds a slight edge. The UK's weak GDP growth, persistent inflation, and policy uncertainty weigh on the GBP, while the EUR remains constrained by dovish ECB sentiment and weak economic data. However, the eurozone’s Q3 growth figures and resilience in PMI data may provide some support. The dovish tones from both central banks create a tug-of-war, but the euro's marginally better growth outlook could see EURGBP edge higher in the near term.

AUDCAD

• AUDCAD is expected to weaken as Australia faces commodity downturns and limited RBA action, while CAD remains subdued by diverging economic strength with the U.S. and falling crude oil prices. Weak Chinese industrial output dampens AUD sentiment due to trade dependence, while a hawkish Fed widens yield differentials unfavorable to both currencies. However, CAD's additional headwinds, such as labor disputes and weaker inflation, make it more vulnerable. Overall, AUD's resilience in housing and banking sectors may slightly mitigate losses against CAD, suggesting a gradual downtrend for AUDCAD with potential short-term stabilization.

NZDCAD

• NZDCAD is likely to weaken as CAD faces challenges from falling oil prices, labor strikes, and soft economic outlooks, while NZD struggles with risk aversion and commodity headwinds. New Zealand’s dependence on dairy exports and weaker manufacturing data weigh on its currency, but better-than-expected Chinese retail sales may provide marginal relief. Meanwhile, Canada’s inflation concerns and potential economic disruption from strikes could further support NZD resilience relative to CAD. However, CAD’s energy export reliance and broader global commodity trends suggest a slightly bearish trajectory for NZDCAD.

Daily Analysis 2024/11/14

14. 11. 2024 - Josef Brynda

Latest news

USD

• USD strength remains across the board as October CPI met expectations, reinforcing rate cut speculations but strengthening the dollar for now.
• U.S. Treasury yield curve steepening signals market confidence in Fed rate cuts, providing short-term support for USD.
• Strong jobless claims and CPI data support USD’s dominance, as expectations for Fed policy shifts later in the year attract dollar buyers.
• Fed Chair Powell’s upcoming speech is a key focus for USD traders, with potential policy insights affecting USD positioning.
• Fed's Kugler: If disinflation progress stalls, it could call for a pause to rate cuts
• U.S. October PPI and other macro data keep the USD in focus as economic resilience supports dollar strength against most currencies.
• Continuing Jobless Claims: 1,873K, lower than forecast of 1,880K.
• Core PPI (MoM) Oct: 0.3%, matching forecast and above previous 0.2%.
• Initial Jobless Claims: 217K, below forecast of 224K.
• PPI (MoM) Oct: 0.2%, in line with forecast, slightly higher than previous 0.1%.

CAD

• USD strength puts pressure on CAD as U.S. economic stability supports the dollar over commodity currencies like CAD.
• Crude oil prices remain stagnant, limiting CAD gains as oil is a major Canadian export.
• Market focus on IEA’s oil demand forecast could influence CAD, especially if it signals future oil price adjustments.
• Lower implied volatility in CAD/USD suggests market caution as traders await insights from Fed Chair Powell’s speech.
• Treasury yield shifts and U.S. inflation data impact CAD, with the Canadian dollar tracking U.S. economic health closely.
• Canada's record economic gap with the United States is about to get wider
• Donald Trump is bullish for oil — even Canadian oil
• Saudi Fund's $1 Billion Deal Boosts Burgeoning Mideast Selldowns
• USD/CAD rises above 1.40 for the first time since 2020

EUR

• EUR/USD dropped below 1.0550 following USD strength, reaching new lows for 2024 amid a lack of euro-supportive data.
• European sovereign bond yields declined, led by German Bunds, as Trump’s potential trade policies raise concerns over Eurozone exports.
• Weak EU sentiment, driven by political uncertainties, dampens the EUR's appeal in comparison to USD.
• ECB rate-cut expectations remain stable, but weaker economic data could amplify downside risks for EUR.
• The EUR remains sensitive to upcoming ECB minutes, with traders seeking clarity on Eurozone monetary policy direction.
• GDP (QoQ) Q3: 0.4%, matching forecast and previous.
• GDP (YoY) Q3: 0.9%, in line with forecast.
• Industrial Production (MoM) Sep: -2.0%, worse than forecast of -1.3% and previous growth of 1.5%.

GBP

• UK house price data exceeded expectations with RICS House Price Balance at +16%, marking the highest level since 2022, providing mild GBP support.
• BOE's Mann argues for holding rates firmly until more evidence of diminished inflation
• Bank of England Governor Bailey’s upcoming speech may influence GBP sentiment, especially on future UK interest rate policies.
• Weak UK manufacturing and economic growth forecasts continue to weigh on GBP/USD.
• The GBP faces pressure from Brexit-related concerns over trade and financial stability within the UK.
• A strong USD limits GBP gains, with the pound showing signs of weakness amid a cautious U.S. trade stance.
• The FTSE 100 hovered near three-month lows as investors weighed global inflation trends and the outlook for central bank rate cuts.
• UK House Price Balance Improves for Second Month
• UK 10-Year Gilt Yield Holds at 4.492

AUD

• Australia's October Employment Change increased by +15.9k, below the expected +25k, signaling moderate job growth.
• Australia's unemployment rate held steady at 4.1%, aligning with market expectations, thus limiting AUD volatility.
• Australia's 10-year government bond yield rose to around 4.75%, hitting its highest level in a year, as investors reacted to domestic jobs report.
• Global risk sentiment shifts, especially concerning China, could impact the AUD due to Australia's trade reliance on China.
• A stronger USD limits AUD gains, with the dollar’s strength pressuring AUD/USD near critical support levels.
• Employment Change (Oct): -15.9K, below the forecast of 25.2K and previous of 61.3K.
• Full Employment Change (Oct): 9.7K, lower than previous 48.8K.
• Consumer inflation expectations in Australia dropped to 3.8% in November 2024 from 4.0% in the previous month, marking the lowest reading since October 2021 amid a further slowdown in inflation.

NZD

• The New Zealand dollar dropped to around $0.586 on Thursday, pressured by the continued strength of the US dollar, which has been buoyed by so-called Trump trades.
• A stronger yuan fix by the People’s Bank of China lent early support to the NZD. However, the impact was short-lived as the Kiwi fell back amid USD momentum.
• Risk aversion in global markets limits the NZD as traders remain cautious over China’s economic stimulus plans.
• The NZD remains sensitive to U.S. Fed decisions, especially rate cut expectations that could ease some USD strength.
• Rising U.S. Treasury yields further weigh on the NZD, adding downside pressure on the NZD/USD.
• The NZD may respond to upcoming domestic inflation and employment data, which will shape the Reserve Bank of New Zealand’s policy stance.
• New Zealand's benchmark S&P/NZX 50 index rose 0.15% to close at 12,693 on Thursday as investors assessed the latest U.S. inflation data and the Federal Reserve's interest rate outlook.

News summary

EURUSD

• With USD strength continuing amid strong jobless claims, CPI data, and Fed rate cut speculations, the dollar holds a dominant position against the euro. EUR/USD has dropped below 1.0550, marking new lows for 2024. While the USD is buoyed by economic resilience and rate cut expectations, the euro faces challenges from declining European bond yields and weak sentiment driven by political uncertainties. The upcoming ECB minutes could provide further direction, but unless Eurozone data improves significantly, EUR/USD is likely to continue its downward trend in the short term

USDCAD

• USD/CAD has climbed above 1.40, a level not seen since 2020, driven by sustained USD strength amid robust economic data and Treasury yield dynamics. With crude oil prices stagnant, CAD struggles to gain traction against the dollar, which is further buoyed by jobless claims and CPI data. U.S. economic stability and rate cut expectations support USD strength, and unless oil prices or Canadian economic data offer a strong reversal, USD/CAD may remain elevated or even trend higher.

AUDUSD

• The strong USD, underpinned by robust economic data and expectations for rate cut adjustments, continues to pressure AUD/USD. While Australian employment data was stable, it fell below forecasts, limiting AUD’s ability to offset USD strength. With Australia’s inflation expectations dropping and China’s economic uncertainty weighing on AUD, this pair may remain subdued. Unless Australia releases stronger-than-expected economic data or there’s a shift in U.S. rate expectations, AUD/USD is likely to stay near support levels or decline further.

AUDNZD

• AUD/NZD may see limited upside as both currencies are pressured by global risk sentiment and strong USD dynamics. Australia’s moderate employment gains and stable unemployment rate provide some support, but NZD remains under pressure from USD strength and cautious sentiment surrounding China’s economic outlook, which weighs on both currencies. This pair may remain near current levels unless significant shifts in risk sentiment or favorable economic data emerge for either country.

EURGBP

• The euro and pound both face domestic challenges, but EUR/GBP could remain relatively stable due to opposing pressures. The euro’s weakness stems from limited economic data and political concerns, while the pound struggles with weak manufacturing and Brexit-related trade anxieties. Although GBP gains mild support from higher UK house prices, both currencies face USD headwinds that could keep EUR/GBP trading within a narrow range until clearer guidance from ECB and BOE leaders emerges.

AUDCAD

• USD strength places pressure on CAD, while a steady USD limits AUD gains, keeping this pair constrained. With stagnant crude oil prices limiting CAD's potential for appreciation, and moderate Australian employment growth limiting AUD's momentum, AUD/CAD may experience limited volatility and trade within a narrow range. A more significant change in either crude oil prices or Australian employment data would be required to alter this dynamic meaningfully.

NZDCAD

• NZD/CAD faces downside pressure as both currencies weaken relative to USD, but CAD may hold an edge due to oil market resilience. Although the NZD initially saw support from a stronger yuan fix, USD strength quickly overshadowed this, limiting NZD gains. The market’s cautious outlook on China’s economic policies keeps NZD under pressure, while CAD remains tethered to U.S. economic performance and oil prices. In the short term, this pair could trend lower unless a positive shift in global risk sentiment favors NZD.

Daily Analysis 2024/11/13

13. 11. 2024 - Josef Brynda

Latest news

USD

• USD strength is supported by a surge in Treasury yields as markets prepare for the U.S. CPI release.
• Volatility is elevated with hedging activity increasing, as CPI data could solidify the USD's dominance.
• Speculation on Trump’s potential regulatory cuts and efficiency reforms is adding bullish sentiment to USD.
• USD/JPY rallies as U.S. yields rise, with the BOJ's past rate hikes failing to match the USD's momentum.
• Demand for USD is fueled by expectations of hawkish U.S. policy moves under Trump’s new administration.
• The Core Consumer Price Index rose by 0.3% month-over-month, in line with market expectations.
• The Core Consumer Price Index increased by 3.3% year-over-year, matching analysts' estimates.
• The total Core CPI Index value reached 321.67, slightly above expectations (321.65) and significantly higher than the previous month (320.77).
• Overall inflation rose by 2.6% year-over-year, meeting expectations and higher than the previous 2.4%.
• The Consumer Price Index rose by 0.2% month-over-month, in line with expectations.

CAD

• CAD faces pressure with crude oil prices near lows due to demand concerns, directly affecting the energy-driven currency.
• Rising U.S. bond yields strengthen USD against CAD, as yield differentials widen.
• President-elect Trump’s pro-oil policies could increase U.S. supply, further pressuring oil and CAD.
• Concerns over Canadian competitiveness in the face of U.S. economic policies could erode confidence in the CAD, particularly if Trump's policies favor a stronger U.S. economy.
• The U.S. administration’s stance on tariffs remains unclear. If tariffs become a policy priority, it could weaken the CAD by reducing Canadian exports to the U.S.
• U.S. CPI data anticipation is keeping CAD volatility high, particularly as inflation could impact BoC rate paths.
• Concerns about OPEC’s demand forecast are weighing on oil prices, limiting upside potential for CAD.
• Loblaw Companies (L) released earnings per share at 2.50 CAD, compared to market expectations of 2.43 CAD.
• Suncor Energy (SU) released earnings per share at 1.48 CAD, compared to market expectations of 1.14 CAD.
• The S&P/TSX Composite Index rose 0.5% to close at 24,923 on Tuesday, marking a record high and outperforming global peers, primarily due to a sharp surge in Shopify shares, which offset declines among commodity producers.
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EUR

• EUR is pressured by USD strength, trading below the critical 1.0600 level amid rising U.S. yields.
• The German DAX's recent declines due to political instability add further bearish sentiment to EUR.
• EU50 decreased to a 13-week low of 4726.00 Index Points. Over the past 4 weeks, Euro Area Stock Market Index (EU50) lost 6.24%, and in the last 12 months, it increased 10.14%.
• European markets are cautious on inflation data, with investors expecting it to reinforce USD strength and weaken EUR.
• Concerns over Trump's cabinet choices and potential tariffs are sparking fears of Sino-European trade impacts, weighing on EUR.
• ECB rate expectations are subdued as inflation concerns dominate, keeping EUR under pressure.
• European stocks tried to recover on Wednesday after a nearly 2% drop the day before, which left the STOXX 50 at a two-month low and the STOXX 600 at a three-month low.
• The Euro dropped below $1.06, the lowest since October 2023, pressured by a strong dollar following Donald Trump's US election victory.

GBP

• Sterling struggles as UK gilt yields rise following U.S. Treasury yield increases, widening yield differentials with the USD.
• The Labour government's new spending policies have raised volatility in UK gilts, adding uncertainty to GBP.
• The UK 10-year gilt yield edged up to 4.458% as investors processed Donald Trump’s election win and UK labor data.
• The FTSE 100 dropped 0.3% to close at 8,022 on Monday, tracking a sharp decline in European equities and erasing the gain from yesterday
• Danske Bank anticipates a strengthening pound in the coming months, reinforcing confidence in the currency based on fundamental expectations.
• November showed a drop in investor confidence in the Eurozone, which could favor the pound by increasing the appeal of UK assets.
• BoE’s Huw Pill indicated that the bank may maintain a firmer stance on monetary policy.
• The upcoming elections in Germany, scheduled for February, could increase uncertainty, potentially making the pound more attractive as a safer currency.
• Rising unemployment could weigh on the pound, though the Bank of England is unlikely to adjust interest rates in response, potentially limiting the influence of these data on rate expectations.
• The multi-week upward trend for the pound/eur remains intact, suggesting the pound could continue rising despite short-term fluctuations.
• GBP is heavily influenced by upcoming U.S. CPI data, with traders hedging for possible downside risks.
• Rising concerns about Trump's trade policies are putting the UK’s economic outlook under scrutiny, affecting GBP.
• Bank of England rate cut expectations are diminished as inflation concerns persist, limiting GBP's upside.
• GB100 decreased to a 14-week low of 8017.00 Index Points. Over the past 4 weeks, United Kingdom Stock Market Index (GB100) lost 3.3%, and in the last 12 months, it increased 7.77%.

AUD

• The USD surge is pressuring AUD as rising U.S. yields make the dollar more attractive.
• Ongoing weakness in China’s credit data adds pressure on AUD due to Australia’s trade dependence on China.
• Gold stabilizes around key levels, providing limited support to the commodity-linked AUD.
• Australian markets are cautiously awaiting U.S. CPI data, with expectations of USD strength impacting AUD.
• Concerns over Trump's potential trade tariffs increase risk aversion, negatively influencing AUD.
• CBA’s strong Q1 profit, driven by growth in transaction accounts, home loans, and household deposits, signals resilience in Australia’s banking sector
• Despite cost-of-living pressures, CBA's assertion that the Australian economy is "fundamentally sound" could strengthen the AUD as investors may interpret it as an indicator of stability.
• CBA's $14.9 billion increase in household deposits suggests robust consumer savings, potentially reducing inflationary pressures
• Planned tax cuts may boost disposable income, supporting consumer spending and AUD, particularly if implemented in a high-rate environment.
• Australia's 10-year government bond yield climbed toward 4.7% following the release of wage data.
• The Australian dollar hovered around $0.653 on Wednesday, staying near its weakest levels in three months as the US dollar continued to gain strength, fueled by "Trump trades."
• Australia's seasonally adjusted wage price index advanced by 3.5% year-over-year in Q3 2024, easing from a 4.1% growth in the previous quarter and falling short of forecasts for a 3.6% rise.
• The S&P/ASX 200 Index dropped 0.75% to close at 8,193 on Wednesday, sliding for the third straight session as the resource-heavy bourse took a hit from weaker commodity prices.
• Iron ore, copper, gold and oil prices came under pressure as the dollar continued to rally on “Trump trades,” with markets betting on robust US economic growth and higher inflation under a second Trump presidency.

NZD

• NZD is under pressure as U.S. Treasury yields continue rising, strengthening the USD.
• Weak sentiment in Asian markets, particularly around China, creates headwinds for NZD.
• Falling commodity prices, notably in dairy, have a direct negative impact on the NZD.
• The Riksbank’s policy direction could indirectly influence NZD via risk sentiment changes in global currency markets.
• Ahead of the U.S. CPI release, NZD faces volatility as markets adjust to anticipated inflation data.
• The NZD fell below US$0.5950, marking a three-month low, indicating investor caution and potential downward pressure as the USD continues its ascent.
• US treasury yields rose by 14 basis points, reaching 4.44%. This spike strengthens the USD, making NZD less attractive due to lower relative returns.
• Iron ore, copper, gold and oil prices came under pressure as the dollar continued to rally on “Trump trades,” with markets betting on robust US economic growth and higher inflation under a second Trump presidency.
• The NZD faces resistance on moves approaching US$0.60, indicating market hesitation and selling pressure at this level.
• New Zealand Shares Track Wall Street Lower
• The NZX 50 fell 89 points, or 0.7%, to 12,660 around midday on Wednesday, erasing gains from the prior session and tracking a decline on Wall Street overnight, amid higher Treasury yields.
• New Zealand Dollar Holds Losses

News summary

EURUSD

• The EURUSD pair is likely to remain under downward pressure as the USD gains strength due to rising U.S. Treasury yields and market anticipation of a solid U.S. CPI release. These factors reinforce USD dominance, while the EUR faces additional strain from weak Eurozone economic indicators, such as the German DAX's decline and political instability in Europe. Furthermore, the ECB’s subdued rate expectations amid inflation concerns add to the EUR's weakness, suggesting that EURUSD will likely trade below key support levels in the near term, potentially testing new lows if U.S. data supports further USD strength.

USDCAD

• USDCAD is set for a bullish outlook with the USD benefiting from rising Treasury yields and increased demand driven by expectations of hawkish U.S. policies. In contrast, CAD is weakened by low oil prices and concerns over U.S.-Canadian trade relations, particularly under Trump’s policies, which could favor the U.S. economy at Canada’s expense. With widening yield differentials and subdued Canadian confidence, USDCAD may continue an upward trend, with the USD strengthening against CAD.

AUDUSD

• AUDUSD faces potential downside as USD strengthens significantly on rising yields and CPI expectations, drawing investor preference away from AUD. The AUD, though supported by solid domestic banking performance, remains vulnerable to weak Chinese economic data and commodity price pressures. As the U.S. CPI release could further boost the USD, AUDUSD may test lower levels, with AUD potentially moving towards weaker thresholds, especially if global risk aversion continues.

AUDNZD

• The AUDNZD pair is likely to trend upward in favor of AUD, as Australia’s strong economic fundamentals and slight resilience in consumer savings offset some pressures from U.S. yield impacts. Meanwhile, NZD faces more direct pressure from falling commodity prices, low dairy prices, and general market caution, exacerbated by high U.S. Treasury yields. Given these factors, AUDNZD may see further bullish movement with AUD likely holding an advantage over NZD in the near term.

EURGBP

• The EURGBP pair may lean towards GBP strength, as the euro remains under pressure from USD strength, Eurozone instability, and lower rate expectations. Meanwhile, GBP could find support from Danske Bank’s positive outlook on GBP and potential for it to act as a safer asset amid Eurozone uncertainty. The UK’s relatively stable monetary stance from the BoE, coupled with the possible safe-haven appeal of UK assets given EU risks, suggests that EURGBP may decline, with GBP gaining momentum over EUR if European political and economic challenges persist.

AUDCAD

• AUDCAD faces downside risks as both currencies are influenced by the energy and commodity sectors, yet CAD appears weaker due to lower oil prices and market concerns over Canadian competitiveness against the U.S. under Trump’s anticipated policies. The AUD, while pressured by a strong USD, shows relative resilience as Australia’s economic fundamentals remain sound, evidenced by increased deposits and robust bank earnings. However, lower Chinese credit data weighs on AUD, meaning AUDCAD might experience slight fluctuations but overall move sideways, with a bearish bias as CAD suffers from continued oil price pressure.

NZDCAD

• NZDCAD may move slightly in favor of CAD as NZD suffers from weaker commodity prices and bearish sentiment from low dairy prices and volatile Asian markets. CAD, despite oil price weaknesses, might benefit from strong domestic corporate earnings (such as those from Loblaw and Suncor), which could provide relative stability. However, with both currencies facing downside pressures, NZDCAD might trade within a range, with a slight edge for CAD over NZD if oil prices stabilize or Canadian equities provide further support.

Daily analysis 11/12/2024

12. 11. 2024 - Josef Brynda

Latest news

USD

• The strong dollar continues amid political factors, including Trump’s policies, which are boosting market sentiment for USD.
• With upcoming Fed speeches, markets will look for indications of policy adjustments, particularly from Fed Chair Powell.
• The NFIB Small Business survey offers insights into economic resilience, potentially influencing USD if results surprise markets.
• Strong U.S. yields and hawkish Fed policy stance are key drivers for USD strength against other currencies.
• U.S. economic data on inflation and retail sales will be pivotal for USD, with expectations of continued resilience in the
• U.S. economy.
• US Small Business Optimism Rises in October
• US 10-Year Treasury Yield Rebounds Further
• Bitcoin Approaches $90,000
• Dollar Climbs For 3rd Session
• US Futures Flat After Positive Session
• Week Ahead - Nov 11th
• US Year-Ahead Inflation Expectations Fall to Near 4-Year Low
• US Consumer Sentiment Highest in 7 Months
• US Consumer Credit Growth Below Estimates in September
• Fed Lowers Rates by 25bps as Expected

CAD

• WTI crude dropping below $68/barrel creates headwinds for CAD, as Canada’s economy is oil-reliant.
• USDCAD is influenced by rising U.S. Treasury yields, making the USD more attractive compared to CAD.
• The Canadian dollar is at risk due to Canada’s September building permits data, which could indicate economic slowdowns.
• Weakening global commodity prices, particularly in metals, could impact CAD negatively, as Canada exports several metals and minerals.
• Risk appetite changes linked to oil prices and U.S.-Canada trade relations continue to be key drivers for CAD.
• Canada Sept building permits +11.5% vs +1.7% expected.
• Crude Oil finds cushion even as traders expect more downside under Trump.
• OPEC cuts 2024 global oil demand growth forecast to 1.82 million BPD (prev. 1.93 milliong BPD).
• OPEC cuts 2025 global oil demand growth forecast to 1.54 million BPD (prev. 1.64 million BPD).

EUR

• Germany’s CPI year-over-year for October stood at 2.0%, showing stability in inflation but aligning with previous expectations, which may limit immediate impacts on EUR.
• The month-over-month CPI for Germany was at 0.4%, consistent with prior expectations, reflecting steady inflation trends in the short term.
• The Harmonized Index of Consumer Prices (HICP) for Germany showed a monthly increase of 0.4%, in line with expectations, which may not add significant pressure on EUR.
• The HICP year-over-year was at 2.4% for October, steady with prior readings and indicating manageable inflation, which may keep ECB policy on its current track.
• Stable inflation indicators from Germany suggest the ECB may not alter its policy stance soon, leaving EUR driven more by external factors and broader EU economic signals.
• Germany’s ZEW Economic Sentiment report is closely watched, as weak results may put downward pressure on EUR.
• The ECB’s lower terminal rate expectations, driven by German growth concerns, could weaken EUR further.
• The Euro remains weak amid political instability in Germany, as Chancellor Scholz faces a potential confidence vote.
• Italy’s bond performance relative to Germany’s indicates investor sentiment, which may affect EUR’s stability.
• The Euro remains under pressure due to ECB concerns on inflation and growth, contrasting with a strong USD.

GBP

• Average Earnings excluding bonuses rose by 4.8% in September, higher than previous readings, indicating potential upward pressure on GBP due to wage growth.
• Average Earnings Index, including bonuses, increased by 4.3%, surpassing expectations, which could strengthen GBP by supporting consumer spending power.
• Claimant Count Change in October was 26.7K, lower than previous numbers, suggesting fewer people are claiming unemployment benefits, which may positively impact GBP.
• Employment Change for the three months ending in September showed a gain of 219K jobs, signaling continued labor market strength, although lower than the prior 373K increase.
• The unemployment rate for September increased to 4.3%, slightly above expectations, which could temper the GBP’s strength as it indicates potential softening in the labor market.
• A high level of jobless claims in October and falling payrolls signal potential economic softening, impacting GBP sentiment.
• The BOE’s upcoming decisions will be crucial, with markets watching Governor Bailey’s speech for clues on rate adjustments.
• Increased concerns over UK economic stability amid Brexit trade issues may create downward pressure on GBP.
• High inflation pressures in the UK could prompt more hawkish BOE moves, but economic strain limits their options, affecting GBP volatility.

AUD

• The Westpac-Melbourne Institute consumer confidence survey showed a 5.3% increase to 94.6 points, indicating that
• Australians are more confident in the economy and spending more.
• Despite a temporary drop after the U.S. elections, Australian consumer confidence remains stable, supporting the value of the AUD.
• The CommBank Household Spending Index rose by 0.8%, driven by spending on household goods and leisure activities.
• Anticipated rate cuts and tax relief increase disposable income.
• Declining fuel and energy prices are easing household budgets, supporting spending and economic confidence.
• The Roy Morgan Business Confidence Index reached its highest level since April 2022, signaling optimism among businesses and economic growth.
• The government’s investment to boost productivity across states could stimulate the economy.
• Competitiveness reforms could add up to AUD 45 billion to GDP annually and reduce prices, which supports the economy.
• Adoption of international product safety standards and a right-to-repair policy could boost foreign investor confidence.
• Rising commodity prices could impact the AUD positively if global demand remains strong, especially from China.
• The currency is under pressure due to concerns over China’s debt relief plan lacking fiscal stimulus, weakening demand for Australian exports.
• U.S.-China tensions create uncertainties for AUD, especially as China is a primary trade partner.
• The AUD may face further challenges if global risk sentiment declines, impacting investor appetite for risk-sensitive currencies.

NZD

• Expectations for stronger U.S. growth and inflation under a potential Trump presidency are boosting the USD, pressuring the NZD.
• China’s limited fiscal measures suggest weaker global growth, which could negatively impact risk assets and commodity-linked currencies like the NZD.
• The potential continuation of U.S. tariffs may hinder global trade and affect commodity-linked currencies like the NZD.
• The rise in the DXY index and global bearish sentiment, compounded by lower German economic confidence and UK employment data, are further weakening the NZD.
• Risk sentiment, U.S.-China tensions, and global economic uncertainties could weigh heavily on the Kiwi dollar.
• The NZD, sensitive to changes in commodity prices, may face challenges from falling commodity prices and rising oil costs.
• The Fed’s hawkish stance continues to strengthen the USD, making it challenging for the NZD to maintain levels above US$0.60.

News summary

EURUSD

• The USD remains strong due to hawkish Fed expectations, high U.S. yields, and resilience in economic data, contrasting with the Euro’s weakness amid steady but subdued German inflation and growth concerns. Germany’s stable CPI limits upward pressure on EUR, while political instability and lower growth expectations further weigh on the currency. Consequently, EURUSD may face downward pressure as the stronger USD benefits from solid economic fundamentals and potential Fed hawkishness, while the Euro struggles with regional uncertainties and a cautious ECB stance.

USDCAD

• Rising U.S. yields and strong USD fundamentals put pressure on CAD, especially as Canada’s oil-dependent economy faces challenges from falling crude prices. The Fed’s hawkish stance and potential for resilient U.S. economic data further strengthen USD. USDCAD may continue to move upward with CAD struggling due to oil price weakness and less favorable economic indicators, whereas USD gains from high yields and robust economic signals.

AUDUSD

• The resilient U.S. economy and hawkish Fed give USD an edge, while Australia’s strong consumer confidence provides some support for AUD. Global tensions and China’s fiscal stance are downside risks for AUD. AUDUSD may face downward pressure as USD strength continues with firm U.S. yields and economic stability, while AUD’s outlook is dampened by external risks, especially if China’s demand falters.

AUDNZD

• Positive consumer confidence and business optimism in Australia support the AUD, especially as domestic spending rises. However, uncertainties in global trade, particularly China’s fiscal policy, create challenges. The NZD faces pressure from lower global demand expectations and weakening risk sentiment. Given these factors, AUDNZD may trend higher if Australia’s internal confidence continues to outperform, while the NZD struggles under weaker commodity demand and global risk sentiment.

EURGBP

• Although the UK faces economic softening with rising jobless claims and Brexit-related trade pressures, strong wage growth could support GBP. In contrast, the Euro is pressured by German growth concerns and ECB dovishness. Both currencies have headwinds; however, the GBP might hold an edge if BOE hawkishness continues, driven by high inflation. The EURGBP pair could see mild bearish movement for EUR if UK labor market strength sustains, while the Euro's momentum weakens amid internal EU issues.

AUDCAD

• Weakening oil prices, which hamper CAD, alongside support for AUD from increased consumer and business confidence, create mixed forces in the AUDCAD pair. Australia’s economic stability contrasts with Canada’s vulnerabilities linked to commodities, particularly oil. Additionally, ongoing U.S.-China tensions could curb demand for AUD, while CAD is likely pressured by both declining oil prices and lackluster building permit data. AUDCAD could see bullish potential if Australian optimism continues, but global uncertainties, particularly in commodity markets, may introduce volatility.

NZDCAD

• Both NZD and CAD are affected by commodity price shifts and risk sentiment, with oil price declines hurting CAD and global demand softness pressuring NZD. Despite Canada's challenges with oil prices, NZD may face greater downward pressure due to risk aversion and limited support from China. NZDCAD could see mixed performance but may trend downward if global demand concerns weigh more heavily on NZD than on oil-sensitive CAD.