An oldie but a goodie – Why central bank differentials still work

2024 continues to be an interesting year for FX. Even more now that the starters gun has been fired with the European Central Bank (ECB) and Bank of Canada as well as the likes of the Riksbank and SNB all starting to their respective cash rates from COVID peaks. This brings us to the next stage – who is next, who is going the other way and whe...

July 3, 2024
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FX Analysis – USD bounces, Hot CPI fails to lift AUD, JPY softer on rising US yields

The USD saw decent strength in Wednesdays session, with The US Dollar Index (DXY)  rising from an open of 104.67, pushing through the resistance at 105  to hit a high of 105.14 on the back of firmer US Treasury yields. Despite this rally DXY is heading into the end of the month looking to have its first monthly decline since December 2023. Ahead ...

May 30, 2024
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FX Analysis – USD boosted by FOMC minutes

Mays FOMC minutes released on Wednesday surprised on the hawkish side, bolstering USD and seeing the Dollar Index (DXY) retake the psychological 105 level. While the general view of FOMC members was that policy was “well positioned”, there were a few more than expected who were open to more hikes if needed, questioning whether policy was restri...

May 23, 2024
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FX Analysis – USD halts decline, GBP downside risks ahead

The recent USD decline stalled in yesterday’s session  with FX traders seemingly taking the view that there is not enough thrust from US data to justify a significantly weaker USD just yet. Aside from the inflation aspect – and markets may have reacted a bit too optimistically to the CPI and PPI – jobless claims also eased back yesterday to ...

May 17, 2024
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FX Analysis – USD looking vulnerable after soft data

The negative dollar reaction to a modest tick-up in US jobless claims yesterday (231k versus consensus 212k) where the US Dollar Index (DXY) dropped from session highs at 105.74 to close at session lows of 105.20 seems to be telling FX traders that tells us that: a) markets are probably lacking some sense of direction in the period between pay...

May 10, 2024
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FX analysis – USD decline continues post FOMC, JPY outperforms on probable BoJ intervention

USD continued the move lower sparked by a somewhat dovish Powell in Wednesdays FOMC meeting. And ahead of today’s key NFP print. DXY did hit highs after hot labour costs data, though quickly reversed to hit 3-week lows of 105.29, closing at session lows and looking to test the major support at 105. JPY was the clear outperformer of G10 cur...

May 3, 2024
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FX – The Uncertain Peak: Assessing the Current State of Inflation and Interest Rates

As April draws to a close, the global economy stands at a pivotal juncture, grappling with the resurgence of inflationary pressures that refuse to retreat. In fact, it feels as though the inflation genie has re-emerged, asking, "Oh, you want more?" This resurgence prompts a crucial question: have we truly witnessed the peak of inflation, and con...

April 30, 2024
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FX Analysis – EUR Rate divergence rhetoric fading?

With an ECB June cut looking likely, FX traders will start looking at the policy path beyond June. Most analysists are calling that the European Central Bank will not cut rates at consecutive meetings and deliver only 75bp of total easing in 2024 based on current data and recent comments from ECB members, the latest being Governing Council member M...

April 26, 2024
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FX analysis – USD rallies on hawkish Fed, JPY holds above 154

USD rallied in Tuesday’s session, with the US dollar Index hitting a 2024 high of 106.510 after hawkish Fed Chair Powell commentary where he noted recent data was showing a lack of further progress on inflation. Powell also added that if higher inflation persists the Fed can maintain current rate as long as needed. On data, building permits and h...

April 17, 2024
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FX analysis – Gold and USD eye key CPI figure

After last week’s blockbuster NFP figure FX traders have a key US CPI reading to look forward to later today.  Rates markets have seen see-sawing expectations on when the Fed will start cutting rates and today’s CPI will be another big part of that puzzle. US CPI for March is expected to come in at a 0.3% increase, a slight cooling from Feb...

April 10, 2024
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FX analysis – USD strength to be tested by NFP

Data releases this week have hinted that the strong US activity story may be about to turn. The ISM services index declined more than expected, with the “prices paid” component slowing meaningfully to a four-year low. Yesterday, the NFIB reported that small business was looking to cut back on hiring and with small businesses accounting for almo...

April 5, 2024
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FX analysis – USDJPY hits 34 year highs, Gold surges

Thin trading in FX markets continued in a holiday shortened week with G10 FX mostly flat against the USD in Wednesday’s session also looking like traders are waiting for Fridays key US PCE inflation reading. The highlights were: USDJPY pushed past its November 2023 high hitting 151.97 which is the highest level this pair has reached since 1990...

March 28, 2024
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FX Analysis – USD weaker, AUD , NZD up on firm Yuan fix, JPY jawboning

USD was slightly lower on Monday with DXY hitting a low of 104.140, holding above the 104 support level. News was light with only New Home Sales of any note, which missed modestly to the downside (662k vs the expected 675k). There was some Fed speak, the highlight being Fed hawk Bostic where he reiterated his desire of just one rate cut in 2024, th...

March 26, 2024
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FX Analysis – USD dips on dovish Powell, JPY continues lower after BoJ

USD was notably lower after what was seen as a dovish FOMC meeting on Wednesday. The Fed 2024 median dot was left unchanged with 3 cuts for 2024 still the Fed forecast but the dovish part came at the presser where Fed Chair Powell downplayed the hot January and February CPI numbers. This dovish tilt saw risk assets surge and the USD dump. US...

March 21, 2024
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FX Analysis – USDJPY surges post BoJ, AUDUSD drops on dovish RBA, USD bid ahead of FOMC

JPY was the currency everyone was watching coming into the pivotal BoJ meeting on Tuesday. The BoJ, as widely telegraphed, ended 17 years of negative interest rates, ETF purchases and their yield curve control policy. While a big move from the central bank there was no real surprise, with USDJPY surging to touch on 151, well into the “interventio...

March 20, 2024
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