Daily analysis 11/11/2024

11. 11. 2024 - Josef Brynda

Latest news

USD

• Key speeches by Federal Reserve Chair Jerome Powell this week are expected to provide clarity on the Fed’s monetary policy stance, influencing USD direction.
• The U.S. 2s10s yield curve flattened as traders unwound short positions after the presidential election, impacting the
• USD through changing interest rate expectations.
• USD strengthens on Trump's tariff policies, raising inflation expectations.
• Stronger U.S. consumer and business sentiment post-election boosts USD.
• Traders are focusing on upcoming U.S. inflation, retail sales, and industrial production data that could further support the dollar’s strength.
• U.S. bond market holiday slows USD trading activity.
• Key October inflation data due Wednesday will impact USD direction.
• Higher tariffs on imports likely to bolster USD further.
• Market speculation that the Federal Reserve could pause rate cuts by December pushed up short-term yields, boosting the USD.
• The US dollar strengthened on Friday, reversing prior losses due to positive sentiment following the U.S. election and upcoming economic data releases.
• Trump's return seen inflationary, prompting USD resilience.
• Seasonal year-end patterns could cap USD gains temporarily.
• Consumer sentiment boost expected from Trump's policies, lifting USD.
• U.S. bond market holiday may lead to USD retracement.
• Fed rate cut by 25 basis points last week gives USD temporary reprieve.
• Federal Reserve’s cautious approach sustains USD rally.

CAD

• The Canadian dollar was pressured by weaker-than-expected employment data, with net job growth at 14.5k versus the anticipated 25k and a lower participation rate.
• USD/CAD seems to extend its gains as US Dollar (USD) appreciates as traders anticipate a less dovish stance from the
• Fed, as Donald Trump is likely to pursue his campaign promises to enact substantial tariffs, including a 10% increase on imports and a reduction in corporate taxes.
• This underperformance in the labor market could prompt the Bank of Canada to consider further rate cuts, influencing CAD weakness.
• Oil prices remain a key factor for the CAD; any further decline in crude oil, amid concerns over global demand, could weigh on the currency.
• The participation rate's drop to its lowest level since January 2021 and the stable unemployment rate at 6.5% suggest potential economic softening that may impact CAD sentiment.
• Market watchers will monitor any signals from the Bank of Canada about future policy moves, especially after the recent 50bps rate cut.

EUR

• The euro weakened against the pound as traders expected the Bank of England’s rate path to remain higher than that of the European Central Bank, driven by new UK fiscal policies.
• ECB rate cut expectations increased after news that German Chancellor Olaf Scholz might expedite a parliamentary confidence vote, heightening political uncertainty.
• The German 10-year yield dropped by 8 basis points to 2.37% as traders anticipated early elections, influencing EUR movement.
• Market participants are watching the upcoming ECB minutes and EU Commission forecasts for signs of future monetary policy changes that could impact the euro.
• Economic data and speeches from key ECB officials this week are critical in shaping market sentiment toward the euro and potential policy shifts.
• Speculation about potential U.S. tariffs targeting the euro area increases uncertainty, which could weaken the euro as it may hurt the eurozone's export-dependent economy.
• The U.S. dollar index reaching new highs underscores the USD's strength, putting downward pressure on the EUR/USD as investors seek the relative safety of the USD.
• The possibility of snap elections in Germany, announced by Chancellor Olaf Scholz, introduces political instability in one of the eurozone's largest economies, likely to weigh on the euro.
• U.S. policies that raise inflation and bond yields could support a stronger dollar, creating a bearish environment for EUR/USD.
• If the Fed continues with less restrictive policies, it might create fluctuations for the dollar, indirectly influencing the EUR depending on rate expectations.
• A boost in U.S. consumer and business sentiment, driven by the recent U.S. election, could strengthen the USD, making the euro less attractive by comparison.
• Japanese interventions to control the yen's strength could lead to potential spillover effects on the EUR.
• Weaker-than-expected economic data from China puts the yuan under pressure, which may indirectly impact the euro as it influences global sentiment and risk appetite.
• If Japan holds off on rate changes, it might bolster the yen, potentially impacting the euro through the EUR/JPY pair as investors seek alternatives.
• If Lighthizer pursues aggressive trade policies, this could hurt the eurozone economy, pressuring the euro.
• Limited scope for Fed rate cuts due to inflation could boost the USD, affecting EUR/USD negatively.
• Speculation around a renewed Plaza Accords-type agreement to depreciate the dollar could create anticipation and
• volatility in EUR/USD.

GBP

• The British pound maintained its strength against the euro, bolstered by expectations that the Bank of England would keep rates higher than the ECB due to UK inflation concerns.
• A surprise increase in interest rates by the Bank of England can lead to a stronger pound as investors anticipate higher returns on UK assets.
• Inflation above expectations signals potential rate hikes, supporting the pound as markets adjust to tighter monetary policy.
• Strong job growth and higher wages can strengthen the pound by reinforcing confidence in the UK economy and potential policy tightening.
• Higher-than-expected GDP growth indicates economic resilience, boosting the pound as it suggests a healthy economic outlook.
• Any news that points to reduced trade barriers or improved UK-EU relations can strengthen the pound by lowering economic uncertainty.
• Hawkish comments from Bank of England policymakers about future monetary policy can lead to an appreciation of the pound as investors anticipate rate hikes.
• Announcements of significant stimulus measures or tax cuts can boost the pound by signaling potential economic growth and higher inflation expectations.
• Higher-than-expected PMI readings indicate expansion in the services or manufacturing sectors, strengthening the pound through improved economic sentiment.
• Reports of rising consumer confidence can signal robust consumer spending, supporting the pound by highlighting economic strength.
• A narrowing trade deficit or a surprise surplus can positively impact the pound by suggesting stronger export performance.
• Weak economic data or dovish policy from the US can lead to a stronger pound due to its inverse correlation with the dollar.
• News confirming political stability or favorable election outcomes can support the pound by reducing uncertainty.
  Increased global risk appetite often benefits the pound due to its status as a risk-on currency, signaling confidence in broader economic conditions.
• A strong rise in house prices and positive real estate trends can boost the pound by signaling economic resilience and consumer confidence.
• Reduced tensions or positive geopolitical developments involving key European nations can strengthen the pound due to improved trade and security outlooks.
• The announcement of new government spending under Labour’s budget added to inflationary pressures, supporting higher BOE rate expectations and GBP resilience.
• UK gilt yields fell but underperformed German Bunds, with markets slightly trimming BOE rate cut expectations, which could impact the GBP.
• This week, key UK employment data and a speech by BOE Governor Andrew Bailey will be pivotal in shaping GBP market movements.

AUD

• The Australian dollar faced downward pressure due to concerns over China’s economy, as recent stimulus measures fell short of market expectations.
• Continued deflation in China, evidenced by weak CPI and PPI numbers, raised concerns over demand, negatively impacting the AUD due to Australia's trade exposure.
• A stronger USD added to the AUD’s challenges, as it pushed down industrial metal prices, affecting Australia’s export revenues.
• AUD traders will watch for any developments in China's economic policy, as new measures or recovery signs could bolster the AUD.
• Commodity market trends, particularly in precious and industrial metals, will play a significant role in determining the near-term direction of the AUD.
• Beijing's 10 trillion yuan stimulus package failed to lift iron ore prices, reducing demand for Australian exports and pressuring the AUD.
• Major mining companies like BHP and Fortescue saw significant losses, impacting investor confidence in the AUD.
• Iron ore prices fell 1.3%, weakening Australia’s resource-dependent economy and the AUD.
• Major consumer staples, including a2 Milk and Endeavour Group, posted losses, signaling lower consumer confidence.
• Senator Canavan's support for tariffs on Chinese imports could strain trade relations, risking downside for the AUD.
• Resolute Mining shares fell 32% after executives were detained in Mali, potentially deterring foreign investment.
• Trump's proposed tariffs on Chinese imports threaten Australia’s trade relationship with China, posing risks for the AUD.

NZD

• The New Zealand dollar is currently weaker against the US dollar, trading at 0.5925, due to concerns over proposed US tariffs on Chinese goods.
• NZD faces pressure as New Zealand’s close trade relationship with China is impacted by potential US tariff increases.
• New Zealand's unemployment rate rose to 4.8% in Q3 2024, marking the highest level in nearly four years.
• The employment rate dropped to 67.8% in Q3 2024, down from 68.4% in the previous quarter.
• Labour force participation in September 2024 fell to 71.2%, a decline of 0.5 percentage points from the previous quarter.
• The RBNZ is set to announce quarterly Inflation Expectations, potentially influencing the NZD due to wage and price projections.
• The release of New Zealand’s monthly Visitor Arrivals data on Wednesday may impact economic sentiment.
• Friday’s BusinessNZ Manufacturing Index, which covers business conditions such as employment and production, is expected to influence the NZD.
• Market sentiment around Donald Trump's tariff proposals on Chinese imports is pressuring the NZD due to New Zealand's trade ties with China.
• The US Dollar Index (DXY) has strengthened to 104.50, contributing to the downward pressure on the NZD.
• Despite a post-election rally, expectations of hawkish Fed rate guidance are supporting the US dollar and affecting NZD valuation.
• The Fed cut rates by 25 basis points as expected, with Chair Powell signaling an ongoing assessment of economic conditions, impacting NZD.
• The University of Michigan Consumer Sentiment Index rose to 73.0 in November, reflecting US economic optimism that weighs on NZD.
• US 5-year Consumer Inflation Expectations increased to 3.1%, which could push USD higher and affect NZD.
• US 2-year and 10-year Treasury yields stand at 4.20% and 4.33% respectively, supporting USD strength and influencing NZD movement

News summary

EURUSD

• The euro is facing significant headwinds due to growing political uncertainty in Germany, particularly with the possibility of early elections, which has led to a drop in German yields. Speculation around ECB rate cuts and increased expectations for softer ECB monetary policy further weaken the EUR. Additionally, U.S. tariffs on European goods could harm the export-driven Eurozone economy, adding to bearish sentiment on the euro. Meanwhile, the USD remains buoyant following the U.S. election, which boosted consumer and business confidence. The potential for higher U.S. tariffs, as Trump’s policies continue to drive inflation expectations, and speculation around the Fed pausing rate cuts by December have strengthened USD yields, supporting the dollar's safe-haven appeal. With these dynamics, EUR/USD is likely to face continued downward pressure as investors favor the USD's relative safety and yield advantage.

USDCAD

• The USD has benefited from stronger post-election U.S. consumer and business sentiment, as well as speculation that Trump’s return could result in policies that drive inflation and bolster the dollar further. The potential for the Fed to pause rate cuts has pushed up short-term yields, and the dollar is finding additional support from expectations of higher tariffs on imports, which may help USD retain strength. Conversely, the CAD remains weak following softer-than-expected employment data, with job growth underperforming expectations and a declining participation rate that signals potential economic slowing. With Canada’s economy facing pressure from reduced oil prices and the Bank of Canada contemplating further rate cuts, USD/CAD is poised to rise as the USD strengthens on favorable economic indicators and CAD suffers from domestic economic challenges.

AUDUSD

• The AUD remains challenged by deflationary pressures from China, as lower Chinese demand has weakened the outlook for Australian exports and placed downward pressure on industrial metal prices. China’s economic stimulus measures have not yielded the expected support for Australia’s economy, and with Trump’s proposed tariffs on Chinese goods potentially impacting Australia-China trade, the AUD faces significant obstacles. In contrast, the USD has been bolstered by stronger U.S. sentiment following the recent election, as well as rising inflation expectations that support Fed speculation around rate hikes or pauses in rate cuts. With upcoming inflation and economic data expected to reinforce USD strength, AUD/USD is likely to continue declining, as the AUD lacks the momentum to offset the USD’s gains.

   

AUDNZD

• Both the Australian and New Zealand dollars are facing pressure from their close economic ties with China, which is currently struggling with deflationary concerns and weakened demand. The AUD is further impacted by lower iron ore prices and a lack of recovery in Australia’s key export sectors, while the NZD faces pressure from a rising unemployment rate, weakening labor force participation, and a lower employment rate in recent quarters. The New Zealand economy is also grappling with lowered market sentiment as a result of U.S. tariff discussions impacting its trade relations with China. While AUD/NZD may remain range-bound given the shared downside risk from China, the AUD could face slightly more downward pressure due to its higher dependence on commodity exports, especially if iron ore prices continue to decline.

EURGBP

• The euro is under pressure due to the potential for snap elections in Germany and heightened uncertainty around ECB policy direction. The euro’s weakness is compounded by concerns about U.S. tariffs targeting European imports, which could hurt the Eurozone’s export-heavy economy. In contrast, the GBP has maintained strength on expectations that the Bank of England will keep interest rates higher than the ECB due to persistently high inflation in the UK. Economic resilience, bolstered by strong job growth and positive real estate trends, further supports GBP strength. With the euro facing political risks and the ECB leaning towards a dovish stance, EUR/GBP is likely to continue trending lower as the GBP remains comparatively more attractive to investors.

AUDCAD

• The Australian dollar is being weighed down by challenges in China, as weaker-than-expected CPI and PPI numbers from China have raised deflationary concerns that negatively impact demand for Australian exports. Moreover, China's recent stimulus measures were insufficient to boost AUD sentiment, leaving the currency vulnerable. On the Canadian side, weaker employment data and the potential for further rate cuts by the Bank of Canada amid economic softening are factors against CAD. However, oil prices remain a crucial driver for CAD; any further declines in crude oil would weigh on CAD, while a recovery could lend it strength. Given these conditions, AUD/CAD may remain in a narrow range, though any pronounced declines in oil or further weakness in China could tilt the pair in favor of CAD.

NZDCAD

• The NZD is under considerable pressure due to a higher unemployment rate, falling employment rate, and lower labor force participation, all of which point to economic softening. The prospect of U.S. tariffs on Chinese goods impacts New Zealand due to its close trade relationship with China, while the USD’s strength continues to weigh down the NZD further. CAD also faces pressure from weaker employment data and the potential for the Bank of Canada to consider more rate cuts, especially if oil prices decline further, though stable crude prices could lend some resilience to CAD. As a result, NZD/CAD could see downward movement in the near term, with CAD possibly retaining a slight advantage given its relatively stronger position amid New Zealand’s economic downturn.

Analysis of the Impact of U.S. Elections

5. 11. 2024 - Josef Brynda

 

 

Daily analysis 11/04/2024

4. 11. 2024 - Josef Brynda

Latest news

USD

• The US dollar weakened after a weak October jobs report, with only +12k nonfarm payrolls vs. +100k expected.
• USD sold off in the Asian session as Trump's odds of winning the US election faded in betting markets.
• The US election tomorrow and the Fed's rate decision on Thursday are key events that could significantly impact USD.
• Strong earnings from major US companies like Amazon and Intel could influence risk sentiment in currency markets.
• The put/call ratio at 1.61, the highest since early August, suggests increased hedging and potential forex market volatility.
• Expectations for the Fed's rate decision on Thursday could cause significant forex market movements.
• The US 3-year Treasury Auction may affect bond yields and, consequently, currency valuations.
• The US ISM Manufacturing index came in lower than expected at 46.5, potentially influencing USD and other major currencies
• Dollar Drops as Some US Polls Shift Toward Harris
• US 10-Year Yield Falls Ahead of Election, Fed Decision

CAD

• Oil Rises as OPEC+ Delays Output Hike
• WTI crude climbing toward $71 per barrel.
• OPEC+ delaying its December production plans may further influence oil prices and, consequently, CAD.
• Gold and silver prices remaining steady may indicate a cautious approach in forex markets ahead of key events.
• Renewed Middle East tensions could increase safe-haven demand
• OPEC secretary general Al Ghais: We are very positive on demand

EUR

• European markets rebounded on Friday, with the STOXX 50 and STOXX 600 each gaining over 1%, potentially supporting EUR
• Eurozone October final manufacturing PMI 46.0 vs 45.9 prelim
• EUR: Boosted by weaker US Dollar
• German bonds saw the two-year yield dip to 2.25%, while the 10-year Bund yield rose to 2.40%, affecting EUR outlook.
• Euro Area Manufacturing PMI Revised Slightly Higher
• Eurozone Sentix Investor Confidence Index edges higher to -12.8 in November vs. -13.8 previous
• France October final manufacturing PMI 44.5 vs 44.5 prelim
• Italy October manufacturing PMI 46.9 vs 48.6 expected

GBP

• The new budget adds at least £142 billion in borrowing over five years, increasing the national debt.
• Sterling stabilized after a steep decline following the UK Autumn Budget announcement.
• UK gilts will be closely watched this week.
• Expectations for BOE rate cuts were adjusted to 95bps by the end of 2025, compared to 125bps a week earlier.
• Sterling Rebounds from 2-1/2-Month Low ahead BoE Decision
• The Office for Budget Responsibility (OBR) downgraded future economic growth projections, which could diminish confidence in the Pound
• 10-year gilt yields spiked by up to 20 basis points, indicating higher borrowing costs and nervousness among investors.
• UK 10-Year Gilt Yield Up to 1-Year High Ahead BoE
• UK Shares Extend Rebound

AUD

• We expect the RBA to keep the cash rate unchanged at 4.35% at the 5 November meeting.
• Australian Dollar Jumps as Greenback Slides
• Top commodity gainers are Copper (1.40%), Steel Rebar (1.06%) and Silver (0.61%). Biggest losers are Gold (-0.05%).
• The Reserve Bank of Australia (RBA) meeting is scheduled for Tuesday, which could significantly impact AUD.
• China's October Caixin PMI release could affect AUD due to Australia's economic ties with China.
• Iron Ore Falls on Weak Fundamentals
• China are reportedly reviewing a bill to raise local government debt ceilings
• Australian Shares Rise in Broad Rebound
• Australia Job Ads Slow Sharply
• Australia Melbourne Institute Inflation Gauge Rises Further
• AUD/USD: Advance expected to face strong resistance at 0.6620

NZD

• New Zealand Dollar Rebounds
• The performance of Asian stock markets, particularly in China, could influence AUD, NZD, and overall risk sentiment in forex.
• NZD may be influenced by the overall risk sentiment in the market, especially given the upcoming US election.
• China's economic data and market performance could impact NZD due to New Zealand's trade relations with China.
• Top commodity gainers are Copper (1.40%), Steel Rebar (1.06%) and Silver (0.61%). Biggest losers are Gold (-0.05%).
• New Zealand Stocks Snap 3-Day Loss
• China are reportedly reviewing a bill to raise local government debt ceilings

News summary

EURUSD

• The US dollar weakened after a disappointing employment report for October, when the number of non-farm jobs rose by only +12,000 compared to the expected +100,000. This below average performance suggests a slowing US economy and raises the possibility of a softer stance by the Federal Reserve in its upcoming interest rate decision. Meanwhile, the euro found support in recovering European markets and a slightly better-than-expected Eurozone Purchasing Managers' Index (PMI), which was revised to 46.0 from a preliminary 45.9. This week will be confirm whether the worse US data is confirmed, which may further influence the direction of the EUR/USD currency pair.  However,the upcoming election results will be crucial. Historical data show that the USD has consistently strengthened when Republicans win, and vice versa. Trump’s intention to reduce corporate and other taxes could lead to inflationary pressures and economic growth, prompting the central bank to raise interest rates, which would benefit the USD. Conversely, Kamala Harris's proposal for an unrealized gains tax could lead to capital outflows abroad, weakening the USD. Additionally, Trump's tariffs on the European Union would put downward pressure on the EUR. Based on current exchange rates and analyses, a victory for D.J. Trump is anticipated. In this scenario, we would be open to short positions, as this has historically led to up to a 10% change.

   

USDCAD

• The weakening U.S. dollar contrasts with a strengthening Canadian dollar against USD, supported by rising oil prices. The decision by OPEC+ to postpone December’s production increase is pushing oil prices higher, benefiting Canada’s economy as a key oil exporter. While there is a risk that OPEC members may not fully adhere to the set rules, the officially planned supply cut in December could further strengthen the CAD. Additionally, the decline in 10-year U.S. Treasury yields ahead of key events, such as the elections and the Fed's decision, could add more pressure on the USD. This week, U.S. economic data will be crucial to watch; if it mirrors the weaker results from last week, the USD/CAD pair may continue to weaken in favor of the Canadian dollar. On the other hand, if the elections bring greater certainty and stability, the USD could regain momentum, potentially leading to a reversal in the USD/CAD trend. But again, if Trump wins, the USD should strengthen significantly against the CAD

AUDUSD

• The Australian dollar strengthened as the U.S. dollar weakened, influenced by weak U.S. economic data, including the disappointing jobs report and a lower-than-expected ISM Manufacturing Index at 46.5. Expectations that the RBA (Reserve Bank of Australia) will keep the cash rate unchanged add further stability for the AUD. Additionally, the upcoming release of China’s October Caixin PMI could impact the AUD due to Australia's close economic ties with China. If U.S. economic data continues to disappoint while the AUD remains supported by stable monetary policy and positive commodity trends, the AUD/USD pair could see upward movement favoring the Australian dollar. This week’s U.S. elections could also bring significant volatility to the pair, potentially shaking up the market further, it will depends who is going to win. In case of Trump, we are expectation downtrend.

AUDNZD

• The New Zealand dollar rebounded but remains sensitive to overall risk sentiment and developments in China, given New Zealand's trade relations. Due to the tied economies and the upcoming elections, we can expect a lot of volatility on this pair, which we will try to trade with one of our scenario instruments.

EURGBP

• Based on recent market data, the EUR/GBP currency pair could trend in favor of the euro against the British pound. European markets have seen a recovery, with the STOXX 50 and STOXX 600 indices each rising by more than 1%, which could strengthen the euro. The final manufacturing PMI for the eurozone in October was revised slightly higher to 46.0 from the preliminary 45.9, indicating a slight improvement in the manufacturing sector. Additionally, the Sentix Investor Confidence Index in the eurozone increased to -12.8 in November from the previous -13.8, signaling a modest improvement in investor sentiment.On the other hand, the British pound faces potential headwinds due to the new UK budget, which adds at least £142 billion in borrowing over five years, increasing national debt and possibly weakening investor confidence. The Office for Budget Responsibility (OBR) has downgraded future economic growth forecasts, which could further weigh on the pound. UK 10-year gilt yields have surged by as much as 20 basis points, indicating higher borrowing costs and investor nervousness. Although the pound has stabilized after a sharp drop and UK stocks continue to recover, the overall economic outlook and increased borrowing may continue to put pressure on the pound to weaken.

AUDCAD

• Rising oil prices, with WTI crude climbing toward $71 per barrel due to OPEC+'s decision to delay its output hike, could strengthen the Canadian dollar given Canada's status as a major oil exporter. However, the AUD is also supported by steady commodity prices and expectations of stable monetary policy from the RBA. The interplay between Australia's commodity exports and Canada's oil revenues could create a balanced movement in the AUD/CAD pair. If oil prices continue to rise significantly, the CAD might gain an edge over the AUD.

NZDCAD

• The New Zealand dollar rebounded, breaking a three-day losing streak, supported by positive developments in Asian stock markets, especially China, which is reviewing a proposal to raise local government debt limits. This could lead to economic stimulus, benefiting New Zealand’s economy due to strong trade ties with China. Rising commodity prices, such as copper (up 1.40%), steel rebar (1.06%), and silver (0.61%), further support the NZD. Meanwhile, the Canadian dollar gains strength from rising oil prices, with WTI nearing $71 per barrel after OPEC+ postponed its planned December production increase. OPEC’s Secretary General expressed optimism about demand, boosting oil prices, which benefit Canada as a major energy exporter. Stable gold and silver prices reflect caution in forex markets ahead of key events like the upcoming U.S. elections, which could impact global risk sentiment. Heightened Middle East tensions could also drive demand for safe-haven assets, affecting NZD and CAD. Overall, if oil prices continue to rise, CAD could gain an edge, while strong Chinese economic data could support NZD, making the NZD/CAD pair subject to increased volatility depending on which of these factors prevails

Daily analysis 10/31/2024

31. 10. 2024 - Josef Brynda

Latest news

USD

• Strong ADP employment data showing 233,000 jobs added in October - positive for USD
• US Q3 GDP growth at 2.8% YoY demonstrates economic strength
• Strong US economic data may delay Fed rate cuts
• US labor market remains robust
• Continuing Jobless Claims came in at 1,862K, better than the forecast of 1,890K and previous 1,888K - positive for USD.
• Core PCE Price Index (MoM) for September was 0.3%, in line with expectations but higher than previous 0.2% - slightly negative for USD.
• Core PCE Price Index (YoY) for September at 2.7%, higher than expected 2.6% but same as previous 
• Employment Cost Index (QoQ) for Q3 was 0.8%, lower than expected 0.9% 
• Initial Jobless Claims at 216K, better than forecast 229K and previous 228K 
• PCE Price Index (YoY) for September at 2.1%, in line with expectations but lower than previous 2.3%
• PCE Price Index (MoM) for September at 0.2%, in line with expectations but higher than previous 0.1%  
• Personal Spending (MoM) for September increased by 0.5%, higher than expected 0.4% and previous 0.3%  

 

CAD

• GDP (MoM) for August was 0.0%, in line with expectations but lower than previous 0.1% - slightly negative for CAD.
• GDP (MoM) for September preliminary estimate at 0.3%, higher than expected 0.0% - positive for CAD.
• Oil prices rising for second consecutive day
• Middle East tensions affecting oil prices and
• Brace yourself, Canada's deficit could swell bigger than we thought
• Canadian dollar could fall below 70 cents if Trump wins
• In Nova Scotia, the corporate tax fear is real as election campaigning begins
• U.S. economy grew at a solid 2.8% pace last quarter in 'good news' for Fed
• High housing costs are the top economic concern for business owners

EUR

• Core CPI (MoM) for October increased by 0.2%, higher than the forecasted 0.1% and a significant change from previous 0.1%
• Core CPI (YoY) for October reached 2.7%, higher than forecasted 2.6% and same as previous month (2.7%)
• CPI (YoY) for October rose to 2.0%, beating expectations of 1.9% and notably higher than previous 1.7%
• CPI (MoM) for October increased by 0.3%, a significant reversal from expected -0.1% and previous month
• Unemployment Rate for September decreased to 6.3% from previous 6.4%, better than expected 6.3%
• ECB expected to cut rates by 125bps by end of 2024
• German inflation and GDP data exceeded expectations
• Italian bonds underperforming due to stagnant GDP 
• ECB's Schnabel warned against premature rate cuts 
• European yields rising after strong German data 
• Germany Retail Sales Unexpectedly Rise in September

GBP

• Budget annoucment
  • The largest tax increases since 1993, which should strengthen Britain's fiscal position.
  • Business social security contributions will increase by 1.2 percentage points to 15%, potentially negatively impacting wages and employment.
  • The economy is projected by the OBR to grow by 2.0% in 2025, but subsequently slow to 1.5% in both 2027 and 2028.
  • Capital gains tax will increase to 18% from 10% at the lower rate, and to 24% from 20% for higher earners.
  • Stricter rules for wealthy foreign residents will be implemented, aiming to raise an additional £12.7 billion over five years.
  • North Sea oil and gas windfall tax will increase to 38% from 35% and will be extended until March 2030.
  • Personal tax thresholds will rise in line with inflation from the 2028-29 financial year.
  • The state health service will receive a day-to-day spending increase of £22.6 billion.
  • Total capital spending will reach £100 billion over the next five years.
  • New fiscal rules will create fiscal headroom of £15.7 billion by 2029-30.
  • Government wants to increase spending by £70bn a year for 5 years

AUD

• Top commodity losers are Steel Rebar (-1.63%), Platinum (-0.55%) and Gold (-0.18%).
• Chinese manufacturing PMI above 50.1
• AUD benefiting from improving Chinese trade relations
• Inflation in Australia has fallen to a three-year low of 2.8%, but core inflation remains above target at 3.5%.
• RBA likely to maintain interest rates at 4.35% until at least February 2025, confirmed by Australia's largest mortgage lender.
• ANZ Business Confidence in New Zealand increased to 65.7 in October from the previous 60.9.
•  NBNZ Own Activity slightly improved to 45.9% from 45.3%.In Australia, Building Approvals showed a significant year-over-year increase of 18.10% in September, while month-over-month growth was 4.4%.
• Private House Approvals grew by 2.22%.The Export Price Index declined by 4.3% in the third quarter, while the Import
• Price Index decreased by 1.4%.Housing Credit showed a modest increase of 0.5% in September, matching the growth rate of Private Sector Credit.
• Retail Sales in September recorded a slight month-over-month increase of 0.1%, while quarter-over-quarter growth was 0.5%.
• All these figures indicate mixed economic performance, with the construction sector showing strong growth while foreign trade and retail remain relatively weak.
• Iron ore prices and other commodities continue to determine Australia's export performance.
• Indo-Pacific regional tensions and China relations may cause AUD volatility.
• Interest rate differentials between Australia and other countries affect AUD's attractiveness to investors.
• ASX performance and global risk sentiment are crucial for short-term AUD movements..
• Labor productivity and technological innovations determine long-term Australian economic competitiveness.
• Energy resources and agricultural products remain important export items affecting AUD..
• RBA monetary policy remains the main tool for controlling inflation and AUD stability.

NZD

• Top commodity losers are Steel Rebar (-1.63%), Platinum (-0.55%) and Gold (-0.18%).
• NZD sensitive to global risk sentiment and Chinese developments
• Chinese economic recovery supporting commodity currencies
• ANZ Business Confidence came in at 65.7 (vs previous 60.9), showing improved business sentiment
• NBNZ Own Activity at 45.9% (slightly up from 45.3%)
• Gold dropping 1% today is negative for both NZD and CAD, but likely more impactful for CAD as it has stronger correlation with precious metals
• The combination of stronger NZ business confidence and weaker gold prices could create a short-term bullish scenario for NZDCAD

News summary

EURUSD

• US economy demonstrates exceptional strength with 233,000 new jobs, 2.8% GDP growth, and robust labor market indicators (Initial Claims 216K, Continuing Claims 1,862K below forecast 1,890K). Core PCE at 2.7% YoY and increased personal spending (0.5% vs expected 0.4%) indicate strong consumer activity. Employment Cost Index at 0.8% suggests moderating wage pressures. European data presents mixed signals: Core CPI at 2.7% YoY (above expected 2.6%), overall CPI surprising at 2.0% (vs 1.9% forecast), and unemployment improving to 6.3%. German data exceeded expectations with unexpected retail sales growth and positive inflation figures, though Italian bonds underperform due to stagnant GDP. The critical monetary policy divergence shows ECB planning 125bps cuts by end-2024 while Fed maintains higher rates longer, supported by Schnabel's warning against premature cuts. This policy disconnect, combined with stronger US fundamentals and mixed European performance, suggests continued EURUSD weakness despite some positive European indicators.

USDCAD

• USD strength stems from positive indicators: strong ADP employment, 2.8% GDP growth, better jobless claims data, and solid personal spending (0.5%). PCE shows controlled inflation at 2.7% YoY. CAD faces mixed signals with September's GDP estimate at 0.3% but August's stagnant 0.0% growth. Canadian economy struggles with expanding deficit projections, Trump-related risks potentially pushing CAD below 70 cents, and corporate tax concerns. Rising oil prices due to Middle East tensions provide support, but high housing costs remain a concern. The U.S. economy's robust growth contrasts with Canadian challenges, suggesting USDCAD upside despite commodity support.

AUDUSD

• AUD benefits from improving Chinese relations and manufacturing PMI above 50.1. Australian inflation dropped to 2.8% (three-year low), while core inflation remains at 3.5%. Building approvals surged 18.10% YoY and 4.4% MoM, showing construction strength. Export prices declined 4.3% in Q3, while retail sales grew modestly at 0.1% MoM. RBA's likely hold until February 2025 contrasts with Fed's hawkish stance. US strong economic data, including robust employment and GDP growth, combined with divergent monetary policies, suggests AUDUSD weakness despite positive Chinese influence and construction sector strength.

AUDNZD

• Both currencies react to Chinese developments and commodity prices, with AUD benefiting from improved China trade relations and strong building data (18.10% YoY growth). NZD shows positive business sentiment (ANZ Confidence at 65.7, up from 60.9) and improved NBNZ Own Activity (45.9% from 45.3%). Commodity weakness affects both currencies, with steel rebar (-1.63%), platinum (-0.55%), and gold (-0.18%) declining. Australian private sector credit grew 0.5%, while housing credit matched this pace. The combination of AUD's broader economic base, stronger Chinese ties, and robust construction sector versus NZD's improved business sentiment suggests mild AUDNZD strength.

EURGBP

• EUR faces mixed inflation data and expected ECB rate cuts (125bps by end-2024), while GBP benefits from major fiscal measures including largest tax increases since 1993. UK's economic growth projection of 2.0% for 2025, business social security contribution increase to 15%, and capital gains tax hikes (18% from 10% lower rate, 24% from 20% higher rate) strengthen fiscal position. North Sea oil tax extension and £22.6 billion health service spending increase show government commitment. The £70bn annual spending increase and £15.7bn fiscal headroom by 2029-30 support GBP, suggesting EURGBP downward pressure despite some positive European data.

AUDCAD

• AUD shows strength through improved Chinese relations, strong building approvals (18.10% YoY), and diversified economy, despite inflation moderation to 2.8%. Housing credit and private sector credit both grew 0.5%, while retail sales increased 0.1% MoM. CAD benefits from oil price increases but faces domestic challenges including deficit concerns and stagnant August GDP (0.0%). While both currencies are commodity-sensitive, AUD's broader economic base, positive Chinese developments, and robust construction sector versus CAD's structural challenges suggest potential AUDCAD upside, despite oil price support for CAD.

NZDCAD

• NZD benefits from improved business confidence (65.7 from 60.9) and Chinese economic recovery. NBNZ Own Activity improved to 45.9% from 45.3%. CAD gains from rising oil prices but faces deficit concerns, political uncertainty, and housing market challenges. Gold's decline (-0.18%) impacts both currencies but affects CAD more significantly. September's preliminary GDP estimate (0.3%) provides some CAD support, but structural challenges and uncertain political landscape suggest potential NZDCAD strength despite oil price support for CAD.

Daily analysis 10/30/2024

30. 10. 2024 - Josef Brynda

Latest news

USA

• Mixed US economic data affecting dollar strength - JOLTS job openings fell below expectations to 7.443M
• US consumer confidence surprisingly strong - highest since March 2021.
• GDP slightly disappointing but still robust
• Core PCE inflation slightly above expectations could support Fed's hawkish stance
• The US private sector added 233,000 jobs in October 2024, significantly beating market expectations of 110,000 and higher than the previous month's 159,000. This much stronger-than-expected employment data suggests:
• US tech sector strong - Nasdaq at record highs.
• US Mortgage Rates Highest in 3 Months: MBA
• DAX Falls About 0.5%
• The US economy likely expanded by an annualized 3% in the third quarter of 2024, the same as in the previous quarter, driven by strong consumer and business spending
• The yield on the 10-year US Treasury note held around 4.25% on Wednesday after retreating from near four-month highs in the previous session as investors prepared for key economic data that could reveal the path for Federal Reserve policy
• USD strength is primarily driven by rising long-term Treasury yields
• Markets are likely already pricing in a Trump victory, supporting expectations of higher growth and fewer rate cuts
• Australian data is strong (labor market, inflation), supporting RBA's hawkish stance
• USD will likely remain strong until:
  • Harris wins the presidential election
  • There's a correction in Treasury yields

CAD

• Oil price stabilization affecting CAD
• Uncertainty about OPEC+ December production increase impacting CAD
• The recent jumbo cut to 3.75% suggests the Bank has urgent concerns about economic growth, though some analysts are already speculating about another possible large cut in December.
• Historical examples of larger rate moves were triggered by negative economic growth, emergencies like the pandemic, or significant inflation concerns - as seen in summer 2022 when the Bank raised rates by 100 basis points in July.
• US economic development as main trading partner significantly affecting CAD
• Gold Hits New Record on Safe-Haven Bid
• OPEC+ could delay oil production hike scheduled for December by one month or more

EUR

• EUR/USD holding above 1.0800 level, indicating certain euro resilience
• German Q3 GDP data shows 0.2% growth quarter-over-quarter, beating expectations of -0.1%,
• The current year-over-year inflation in Germany (YoY) reached 2.0%, which is higher than the forecasted 1.8% and previous 1.6%.
• Month-over-month inflation in Germany (MoM) is 0.4%, exceeding expectations of 0.2% and higher than the previous value of 0.0%.
• European bond yields rising due to fiscal spending concerns
• German 10-year real yields at highest level since July (0.47%)
• Eurozone Economic Sentiment Falls to 8-Month Low
• Eurozone Services Sentiment Holds at 8-Month High
• Germany Unemployment Rate Edges Up to 2021-Highs of 6.1%
• Spanish Stocks Extend Losses
• The German economy expanded 0.2% qoq in Q3 2024, rebounding from a 0.3% fall in Q2, and beating forecasts of a 0.1% contraction, preliminary estimates showed
• German auto industry’s transformation could result in 190,000 job losses by 2035

GBP

• Key UK budget statement today - expected to have significant impact on GBP
• Sterling showing strength against euro ahead of budget statement
• UK gilts falling ahead of budget, 10-year real yield at one-year high of 0.82%
• Stocks in United Kingdom Hit 7-week Low
• Wide yield/swap spreads are significantly weighing on the Canadian Dollar
• Bank of Canada's expected easing contrasts with Fed's hesitancy to cut rates
• This divergence in monetary policy is creating downward pressure on CAD
• USD/CAD fair value is around 1.3931
• Key resistance level at 1.3945/50
• Important support levels at 1.3895 and 1.3860
• USD trend appears technically overstretched

AUD

• Chinese 10 trillion yuan stimulus package may support AUD
• CPI (QoQ) for Q3 was 0.2%, below expected 0.3%
• CPI (YoY) for Q3 reached 2.8%, above expected 2.3%
• CPI Index Number for Q3 stood at 139.10, slightly up from 138.80
• Trimmed Mean CPI (YoY) for Q3 remained steady at 3.5%
• Trimmed Mean CPI (QoQ) for Q3 was 0.8%, in line with expectations
• Commodity prices, especially copper, affecting AUD due to Chinese stimulus
• Gold prices at record highs supporting commodity currencies including AUD
• Top commodity losers are Platinum (-1.45%) and Iron Ore CNY (-1.08%). Gains are led by Steel Rebar (0.67%) and Gold (0.27%).
• Copper stabilized around $4.34 per pound on Wednesday, trading within a sideways range since mid-October, buoyed by expectations that China, the world’s top consumer, will announce additional stimulus measures during a leadership meeting next week.

NZD

• Commodity markets and Asian developments significantly affecting NZD
• Chinese economic data and stimuli having direct impact on NZD
• Asian market sentiment crucial for NZD development
• Top commodity losers are Platinum (-1.45%) and Iron Ore CNY (-1.08%). Gains are led by Steel Rebar (0.67%) and Gold (0.27%).
• Copper stabilized around $4.34 per pound on Wednesday, trading within a sideways range since mid-October, buoyed by expectations that China, the world’s top consumer, will announce additional stimulus measures during a leadership meeting next week.

News summary

EURUSD

• The EUR/USD pair is showing resilience above 1.0800, supported by better-than-expected German Q3 GDP growth of 0.2% QoQ. However, the USD remains strong due to robust US economic data, including surprisingly strong private sector job additions of 233,000 in October and sustained 3% GDP growth. The divergence between US and European economic performance suggests potential downward pressure on EUR/USD, with US yields and strong tech sector performance supporting the dollar. European concerns about rising bond yields due to fiscal spending and Germany's increasing unemployment rate (6.1%) could further weaken the euro, while the Fed's hawkish stance supported by above-expectation Core PCE inflation data could strengthen the USD

USDCAD

• The Canadian dollar is facing pressure from oil price uncertainty and OPEC+ production decisions, while the USD continues to show strength from robust economic data and higher Treasury yields. The Bank of Canada's dovish stance contrasts with the Fed's hawkish position, suggesting continued upward pressure on USD/CAD, with fair value around 1.3931. Technical resistance at 1.3945/50 and support at 1.3895 and 1.3860 will be key levels to watch

AUDUSD

• The Australian dollar is being influenced by mixed domestic data, with Q3 CPI showing higher-than-expected yearly inflation at 2.8% but lower quarterly figures at 0.2%. The potential Chinese 10 trillion yuan stimulus package could provide support for AUD, while strong US economic data and tech sector performance continue to support the USD. The commodity market dynamics, particularly copper stabilizing around $4.34 and record-high gold prices, could provide some support for the AUD, though USD strength might dominate in the near term.

AUDNZD

• Both currencies are heavily influenced by Chinese economic developments and commodity markets, with the announced stimulus package potentially benefiting both currencies. Australia's stronger economic data and inflation figures might give the AUD a slight edge over the NZD, though both currencies remain sensitive to commodity price movements, particularly in metals and gold

EURGBP

• This pair might trend lower as UK data shows resilience in mortgage markets while European manufacturing concerns persist. French bonds' outperformance after Moody's Aa2 rating affirmation provides some EUR support, but German industrial weakness and broader European car industry concerns could weigh more heavily. Sterling's relative strength, supported by positive lending data and gilt market performance, could dominate.

AUDCAD

• The Australian dollar might find support against the CAD due to stronger domestic data and potential benefits from Chinese stimulus, while the CAD faces headwinds from oil market uncertainty and the Bank of Canada's dovish stance. The commodity price dynamics, particularly gold's record highs and copper stability, could provide additional support for the AUD against the CAD.

NZDCAD

• The New Zealand dollar's performance against the CAD will likely be influenced by the contrasting drivers of Asian market sentiment and oil price dynamics. The uncertainty surrounding OPEC+ decisions could weaken the CAD, while potential Chinese stimulus measures could support the NZD, though both currencies remain vulnerable to commodity market fluctuations.

Daily analysis 10/29/2024

29. 10. 2024 - Josef Brynda

Latest news

USA

• US Treasury yields rising on weak auction demand
• US Job Openings Unexpectedly Fall from 7.980M to 7.443M.
• US Stocks Fall, Earnings On The Radar
• US House Prices Rise the Least in Ten Months
• US Futures Lower, Earnings Eyed
• US Goods Trade Deficit Rises to Over 2-Year High
• Fed rate cut expectations for November 7th remaining high
• Major tech earnings (Alphabet, Microsoft, Meta) potentially impacting dollar
• US election uncertainty affecting currency markets
• Treasury auctions showing weak demand for 2- and 5-year notes
• 10-year yield around 4.30% aroud around a 3 months high" 
• Multiple US economic data releases this week including growth and employment figures
• Federal Reserve rate-cut path being closely monitored

CAD

• Oil price slump putting pressure on CAD (crude tumbling the most in two years)
• Canada Wholesale Sales Seen Rebounding in September
• Natural gas decline of nearly 10% potentially impacting CAD
• Canadian dollar sensitivity to commodity market volatility
• North American trade dynamics affecting CAD movement
• US election uncertainty impacting CAD due to close economic ties with US
• Energy sector performance crucial for CAD outlook

EUR

• German 10-Year Bund Yield Climbs to 8-Week High
• European banks (Santander, HSBC) reporting better than expected earnings
• Volkswagen closing three German plants, indicating manufacturing sector weakness
• French bonds outperforming after Moody's affirmed Aa2 rating
• Italian 10-year yields at 3.49%
• French 10-year yields at 3.01%
• European car industry facing weak demand environment
• BASF and Volkswagen earnings upcoming
• The GfK Consumer Climate Indicator for Germany rose to -18.3 heading into November 2024 from a marginally revised -21.0 in the previous period.

GBP

• UK September Mortgage Approvals data due at 0930 GMT
• UK gilts flattening and outperforming US Treasuries
• British gilt remit expected to favor short-dated issuance
• UK Consumer Credit Growth Slows, Misses Forecasts
• UK Mortgage Lending Falls More Than Expected
• UK Mortgage Approvals Above Forecasts, at 2-Year High
• UK Shares Edge Higher on Strong Earnings

AUD

• AUD showing weakness ahead of Australia's Q3 CPI data release
• Metals Commodities Updates: Steel Rebar Drops by 1.20%, Iron Ore CNY (-0.64%), Gains are led by Platinum (0.63%), Silver (0.58%) and Gold (0.26%).
• Market sentiment affecting AUD due to its risk-sensitive nature
• China Stocks Fall as More Stimulus Eyed

NZD

• NZD movement closely correlated with risk sentiment and commodity prices
• Following similar risk-sensitive pattern as AUD
• Affected by broader market concerns about global growth
• Trading influenced by Chinese economic outlook as major trading partner
• Steel Pares Rebound on Stimulus Skepticism
• China Stocks Fall as More Stimulus Eyed
• New Zealand Shares Close Nearly Flat

News summary

EURUSD

• The pair is impacted by diverging economic signals between the Eurozone and the United States. Recent data reveals a mixed economic environment in the US, with rising Treasury yields due to weak demand in recent auctions and an unexpected dip in job openings, which could suggest economic cooling. Simultaneously, the Eurozone's bond yields are climbing, with Germany's Bund yields reaching an 8-week high. Despite rising Eurozone yields, the U.S. dollar might still see strength given the Fed's high interest rate expectations and ongoing safe-haven demand amid U.S. economic uncertainties, such as looming election uncertainties and significant tech earnings that could impact investor sentiment. Therefore, while EUR/USD could experience near-term volatility, the U.S. dollar may hold an upper hand unless European growth shows stronger signs of resilience, potentially leading to a gradual weakening of the euro.

USDCAD

• USD/CAD is particularly influenced by the recent slump in oil prices, given Canada’s reliance on the energy sector. The steep decline in crude oil to a two-year low has weighed heavily on the CAD, while the U.S. dollar has found support from elevated Treasury yields and firm rate expectations. This scenario points to a strengthening of the USD against the CAD, as weaker oil prices could further hamper Canadian economic growth and reduce the likelihood of any significant CAD rally. Unless oil prices rebound or the U.S. faces economic setbacks, USD/CAD may see upward momentum in the near term.

AUDUSD

• The Australian dollar is heading towards its largest monthly decline since September 2022, pressured by concerns over declining Chinese industrial profits and overall Chinese economic slowdown. While Australia's technology sector shows growth thanks to positive Wall Street results, the change in expectations regarding US interest rate cuts suggests further potential pressure on AUDUSD. Given current fundamentals, continued downward pressure on this pair can be expected.

AUDNZD

• AUD/NZD is influenced by global risk sentiment and commodity price fluctuations, with both currencies experiencing downside pressure from falling steel and iron prices. However, with China’s economic outlook remaining critical, the AUD may be slightly more vulnerable than the NZD if China's economic support measures fall short. Therefore, the AUD/NZD could see some downside for the Australian dollar against the NZD, especially if New Zealand’s economy shows resilience or if commodity prices continue their downward trajectory, aligning with global growth concerns.

EURGBP

• This pair might trend lower as UK data shows resilience in mortgage markets while European manufacturing concerns persist. French bonds' outperformance after Moody's Aa2 rating affirmation provides some EUR support, but German industrial weakness and broader European car industry concerns could weigh more heavily. Sterling's relative strength, supported by positive lending data and gilt market performance, could dominate.

AUDCAD

• Commodity dependencies shape, with recent energy and metal price declines impacting both currencies. CAD feels the pressure from the slump in oil prices, while AUD is affected by falling metals and China’s market slowdowns. Both commodity currencies face significant headwinds. The pair's direction might depend on relative commodity performance, but given oil's dramatic decline versus more modest metal price movements, AUD might show relative strength against CAD in the near term.

NZDCAD

• Commodity market trends are also pivotal for the pair, with both currencies impacted by natural gas and oil declines. Canada’s reliance on energy exports places CAD under greater pressure amid falling prices, while New Zealand’s economy, though sensitive to Chinese demand, could be less immediately affected. As a result, NZD/CAD could see some modest upward movement favoring the NZD, particularly if Canadian energy markets remain unstable, barring a recovery in oil prices.

Daily analysis 10/28/2024

28. 10. 2024 - Josef Brynda

Latest news

USA

• Strengthening on rising odds of Republican sweep in upcoming US elections
• University of Michigan survey revision higher to 70.5 supports US economic resilience narrative
• Treasury yields rising with 2-year reaching 4.10%, highest since August
• Oil Sinks as Israeli Strikes Avoid Iranian Crude Facilities
• Strong September durable goods data supporting dollar strength
• Critical jobs report coming this Friday could further influence USD direction
• Copper Eases on Stronger Dollar, Treasury Yields
• US 10-Year Yield Hits Fresh 3-Month High

CAD

• Showing resilience despite Bank of Canada's 50bps rate cut last week
• Oil price volatility affecting CAD as crude slumped 4% after Israeli strikes
• Performing better than other commodity currencies in current market conditions
• US-Canada trade relations could be impacted by potential Trump presidency
• Housing market and domestic economic data remain key factors
• Bank of Canada Governor Tiff Macklem's parliamentary appearances on Tuesday and Wednesday could signal future monetary policy direction, potentially affecting CAD through interest rate expectations.
• Thursday's GDP data release for August and September preliminary estimates will be crucial, especially after August's indication of economic stagnation.
• Friday's earnings reports from energy giants Enbridge and Imperial Oil are significant for CAD, given the energy sector's importance to Canada's economy and Enbridge's new $700 million Gulf investment.

EUR

• European Stocks Start the Week Higher
• Trading around 1.08 with increasing odds of 50bps ECB rate cut in December
• European bond yields rising with Germany's 10-year up 11 basis points to 2.29%
• Upcoming credit reviews for France and Belgium adding market tension
• ECB's monetary policy stance remains crucial for euro direction
• Regional economic performance disparities affecting euro stability
• Wednesday's preliminary October inflation data from Spain and Germany could impact EUR
• French Stocks Open the Week Higher

GBP

• Capped below 1.30 ahead of UK's Labour party first budget in 15 years
• Pound to Euro exchange rate is hovering around the 9-day moving average at 1.20
• There's significant selling pressure at 1.2030-1.2050 level
• This psychological barrier is proving difficult for GBP bulls to break through
• UK 10-year yield saw largest weekly rise since January, up 18 basis points
• Economic data and BOE monetary policy expectations driving sterling movement
• Inflation concerns continue to influence GBP trading patterns
• Housing market stability remains a key factor for sterling outlook
• Friday's U.S. jobs report could create market volatility, strong report might cause GBP/EUR to pull back below 1.20
•  

AUD

• Metals Commodities Updates: Steel Rebar Rises by 2.53%
• AUD is heading towards its biggest monthly decline since September 2022 (potential decline of 4.80% for October 2024).
• Australian Dollar Falls to 2-½-Month Low
• China Industrial Profits Decline 3.5% YoY in Jan-Sept
• Weakened amid broader USD strength and concerns over China's industrial profits declining 27.1% YoY in September
• PBoC Launches Monthly Reverse Repo Operations
• Facing pressure from potential Trump trade policies and higher tariff risks affecting commodity currencies
• The Nikkei 225 Index Closes 1.86% Higher
• Australia 10Y Bond Yield Rises by 10 bps
• Chinese economic slowdown continues to impact AUD as Australia's largest trading partner
• The technology sector in Australia recorded strong growth thanks to positive results from Wall Street, mainly due to the performance of large technology companies (e.g., Tesla +22% after earnings announcement)
• Expectations regarding US interest rate cuts have changed - from the original 40-50 basis points to 23 points, indicating a stronger US economy and potentially further affecting the AUD/USD exchange rate.
• Resource sector performance remains crucial with commodities showing mixed performance
• RBA monetary policy stance remains important for future direction

NZD

• Weakening alongside other commodity currencies amid USD strength
• New Zealand Dollar Falls to 3-Month Lows
• NZD weakens to 0.5938 vs USD as RBNZ signals possible 50-75bp rate cut in November.
• Key data this week: ANZ Business Confidence (Thursday) and building consents (Friday) to guide NZD direction.
• Strong USD (DXY at 104.00) and US growth (3.4% Q3) continue to pressure NZD/USD.
• Potential impact from Trump trade policies creating uncertainty
• China Industrial Profits Decline 3.5% YoY in Jan-Sept
• The Nikkei 225 Index Closes 1.86% Higher
• Chinese economic slowdown affecting NZD as key trading partner
• PBoC Launches Monthly Reverse Repo Operations
• RBNZ monetary policy expectations influencing kiwi movement
• Dairy prices and agricultural exports remain crucial factors

News summary

EURUSD

• The European currency is currently trading around the 1.08 level, with the market increasingly pricing in the possibility of a 50 basis point ECB rate cut in December. European bond yields are rising, with the German 10-year yield up 11 basis points to 2.29%. Wednesday's upcoming preliminary inflation data from Spain and Germany will be key to the euro's future direction. Combined with strong US data and rising US bond yields, further downward pressure on the EURUSD can be expected, especially if Friday's US labour market report comes out positive

USDCAD

• The Canadian dollar shows resilience despite the Bank of Canada's recent 50 basis point rate cut. Oil price volatility following Israeli strikes significantly affects CAD. Key focus will be on BoC Governor Tiff Macklem's parliamentary appearances and Thursday's GDP data. Given the current US dollar strength and uncertainty regarding oil prices, USDCAD may continue to rise, especially if Canadian economic data disappoints

AUDUSD

• The Australian dollar is heading towards its largest monthly decline since September 2022, pressured by concerns over declining Chinese industrial profits and overall Chinese economic slowdown. While Australia's technology sector shows growth thanks to positive Wall Street results, the change in expectations regarding US interest rate cuts suggests further potential pressure on AUDUSD. Given current fundamentals, continued downward pressure on this pair can be expected.

AUDNZD

• This cross rate is primarily influenced by the different approaches of both countries' central banks and their exposure to Chinese slowdown. While the RBA maintains a more hawkish stance, RBNZ signals significant rate cuts. This could lead to AUDNZD strengthening, despite general pressure on both currencies due to Chinese issues. In the short term, volatility can be expected with a potential upward trend for this pair.

EURGBP

• The European currency is facing an interesting situation in relation to the British pound, with the ECB signalling a possible 50 basis point rate cut in December, while the British economy is showing mixed signals. The EURGBP is trading around the 9-day moving average at 1.20, with significant selling pressure in the 1.2030-1.2050 range. Upcoming preliminary inflation data from Spain and Germany will be key to the direction of the Euro, while the Pound awaits the first Labour Party budget in 15 years. With the UK 10-year yield posting its biggest weekly rise since January (up 18bps) and European bond yields also rising (German 10-year up 11bps to 2.29%), we can expect increased volatility in the pair. In the short term, the 1.20 level could be tested, especially if European inflation data comes in significantly different than market expectations or if the new UK budget brings in surprising elements.

AUDCAD

• The Australian and Canadian dollars are both facing unique pressures, with AUD experiencing significant weakness due to Chinese economic concerns while CAD shows resilience despite the Bank of Canada's recent rate cut. The relationship between these commodity currencies is particularly influenced by their different economic drivers - Australia's exposure to Chinese industrial demand and Canada's dependence on oil prices. With oil prices volatile following Israeli strikes and Chinese industrial profits declining, AUDCAD could see downward pressure, especially if Canadian economic data proves strong. However, the pair's direction will largely depend on the relative impact of commodity prices, with oil market dynamics potentially favoring CAD strength in the near term.

NZDCAD

• The New Zealand dollar faces significant headwinds with RBNZ's dovish stance signaling potential rate cuts of 50-75 basis points in November, while the Canadian dollar maintains relative stability despite BoC's recent actions. The upcoming Canadian GDP data and BoC Governor Macklem's parliamentary appearances could create volatility in this pair. NZDCAD might see continued downward pressure if the RBNZ confirms its dovish stance and Canadian economic indicators remain resilient. The pair is also influenced by the divergence in commodity exposures, with New Zealand's agricultural focus contrasting with Canada's energy sector dependence, making oil price movements and global trade dynamics key factors for this cross rate's direction.

Daily analysis 10/24/2024

24. 10. 2024 - Josef Brynda

Latest news

USA

• USD continues to strengthen due to higher Treasury yields and geopolitical risks.
• US election uncertainty creating volatility in forex markets.
• Rising US Treasury yields supporting USD strength across major pairs.
• Fed's Beige Book suggests further rate cuts, affecting USD sentiment.
• US Treasury yields reaching highest levels since July, supporting USD.
• Rising probability of Trump's victory creating uncertainty for USD and global trade.
• US labor market remains key indicator for Fed monetary policy.
• US-China trade tensions may escalate after US elections, impacting AUD and NZD.

CAD

• Bank of Canada's 50bps rate cut to 3.75% impacted CAD, with USDCAD reaching 1.3863.
• Canadian dollar showing sensitivity to BOC's future rate guidance.
• Bank of Canada signals more potential rate cuts if economy evolves as expected.
• Bank of Canada cut rates by 50bps to 3.75% and signaled potential further cuts, creating long-term pressure on CAD.
• BOC Governor Macklem emphasizing gradual inflation reduction and possibility of further rate cuts.
• Canadian economy aiming for "soft landing" in inflation reduction.

EUR

• EUR weakness continues due to dovish ECB comments and Trump presidency concerns.
• But today regarding to PMI data Euro Edges Up Slightly from 4-Month Low
• German 10-Year Bund Yield Drops Below 2.3%
• Euro Area Manufacturing PMI Rises to 5-Month High
• EURGBP rose to 0.8350 after rejecting 0.83 support level.
• ECB's dovish stance, with some members discussing potential 50bps cut, pressures EUR.
• Eurozone Preliminary Manufacturing PMI improves to 45.9 in October vs. 45.1 expected
• European bonds rally on ECB cut expectations, impacting EUR.
• ECB speakers showing mixed views on rate cuts, creating EUR uncertainty.
• German Preliminary Manufacturing PMI unexpectedly rises to 42.6 in October vs. 40.5 expected
• European economic concerns weighing on EUR performance.
• ECB members discussing potential 50bps cut, with Centeno warning about increasing growth risks - negative for EUR.
• ECB President Lagarde confirming disinflation trends in Eurozone..
• Weaker European industrial performance creating pressure on EUR.

GBP

• EURGBP rose to 0.8350 after rejecting 0.83 support level.
• UK 10-Year Gilt Yield Rises Toward 16-Week High
• British economy awaiting BoE signals on future monetary policy.
• UK Business Optimism Deteriorates to 2-Year Low
• The latest reading revealed that growth in the manufacturing sector slowed for the second consecutive month, reaching its lowest level in six months and approaching a near-neutral level.
• UK Services Activity Slows More than Expected
• UK Private Sector Growth Falls to 11-Month Low

AUD

• AUDUSD is testing its 200-day moving average at 0.6629.
• Chinese government planning 2 trillion CNY market stabilization fund, affecting AUD as a China-dependent currency.
• L'Oreal reporting weak Chinese demand, signaling continued Chinese economic issues - negative for AUD/NZD.
• Australian economy remains sensitive to Chinese developments and commodity prices.
• Australian Dollar Hovers Near 2-Month Low
• Iron Ore Extends Fall on Signs of Robust Supply
• Australia Services Activity Continues to Expand for the 9th Month in October
• Australia Manufacturing PMI at 53-Month Low in October
• Australia Private Sector Activity Rises to 2-Month High

NZD

• New Zealand Dollar Remains Under Pressure
• New Zealand Stocks Fall for 3rd Session
• L'Oreal reporting weak Chinese demand, signaling continued Chinese economic issues - negative for AUD/NZD.
• US-China trade tensions may escalate after US elections, impacting AUD and NZD.

News summary

• The USD continues to show strength across major currency pairs, supported by rising Treasury yields, which have reached their highest levels since July. Geopolitical risks further contribute to this trend, as they increase demand for the USD as a safe haven. Uncertainty related to the upcoming US elections, particularly the rising probability of Trump's victory, adds volatility to the forex markets. This political uncertainty, along with rising yields, creates a mixed environment for the USD, but higher yields continue to support the currency. This affects pairs like EURUSD and GBPUSD, where the USD may continue to strengthen.
• In the Eurozone, the EUR is under pressure due to a dovish stance from the ECB, despite a slight uptick in PMI data. Manufacturing PMI has risen to a 5-month high, and German PMI showed unexpected growth, which temporarily supported the EUR. However, discussions of a potential 50bps rate cut by the ECB are likely to weigh down the currency. As a result, EURUSD remains vulnerable to further declines, while EURGBP has shown resilience, rising to 0.8350 after finding support at the 0.83 level. Future euro performance will largely depend on how the ECB balances inflation control with growth risks, as highlighted by members like Centeno.
• Commodity currencies such as the AUD and NZD are experiencing challenges amid weaker Chinese demand and economic concerns. The AUDUSD is currently testing its 200-day moving average at 0.6629, while the AUD and NZD are both closely tied to developments in China. The proposed 2 trillion CNY market stabilization fund could provide some relief, but broader Chinese economic issues continue to impact these currencies. Additionally, any post-election escalation in US-China trade tensions may exacerbate downward pressure on AUDNZD, a pair particularly sensitive to both Chinese developments and geopolitical risks.
• The CAD has faced downward pressure following the Bank of Canada's (BoC) recent 50bps rate cut to 3.75%, leading to a notable rise in USDCAD to 1.3863. Governor Macklem's emphasis on a gradual reduction in inflation and the possibility of further rate cuts suggests that the CAD may continue to weaken, especially if the US maintains its higher yields and stronger USD stance. This divergence in monetary policy between the US and Canada could drive further gains in USDCAD, while cross-pairs like AUDCAD and NZDCAD may also experience volatility depending on shifts in global commodity prices.
• Looking ahead, the divergence in central bank policies, particularly between the Fed and other major central banks like the ECB and BoC, will be a key driver of forex movements. Cross-currency pairs like AUDNZD will likely remain highly sensitive to external factors such as Chinese economic conditions, while pairs like EURGBP will continue to reflect the relative economic performance and monetary policies between the UK and Eurozone.