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Published: 2023-12-27T19:00:02.000Z

N America Summary and Highlights 27 Dec

byMike Gallagher

Director of Research , Macroeconomics and Strategy
-

The USD lost ground in North American trading against most currencies. 

North America 
The USD lost ground in North American trading against most currencies.  The move was flow and sentiment driven rather than new news, with EUR and GBP/NOK and SEK gaining a similar percentage and AUD and JPY somewhat less.  However, traders indicate that the difference is not major and the key point is that the intense 2024 Fed rate cut expectations and end of year flows are hurting the USD. 


The strongest performer against the USD was the CHF, which also surged against the EUR.  This is largely flow related.  Though some note that the SNB will likely cut less than the Fed and ECB in 2024, others note that the SNB has stopped selling FX reserves to reduce the balance sheet that removes a big flow in 2024. 


Europe 
USD/JPY drift marginally lower in Europe, after the JPY weakness in Asia.  Some further JPY losses are expected, as the BOJ summary from the December meeting dampens the idea of a January rate hike from the BOJ from -0.1%.  Even so, on USD/JPY traders see the upside capped around 143.30 technical resistance.  


EUR/USD and other European majors were stable in European trading, but the tone remains USD negative.  Though the money markets are discounting the same amount of Fed and ECB easing, the FX market feels more confident about Fed cuts.  Additionally, a Fed easing cycle is seen to be USD negative, both as it reduces the carry appeal of the USD and as the USD is overvalued.  Traders also say that some further end of year USD selling could be seen, before consolidation ahead of the December U.S. employment report on December 6.   
 

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