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Published: 2023-12-27T11:54:10.000Z

European Summary and Highlights 27 Dec

byMike Gallagher

Director of Research , Macroeconomics and Strategy
-

BOJ December meeting summary disappoints JPY hawks in Asia, before running out of steam in Europe.  

European session

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.   


Asia Session

BOJ December meeting summary disappoints hawks as it does not give any cue of change of monetary policy, or worse certain member left dovish remarks. More Ueda remarks on a Monday at Japan Business Federation meeting also crossed the wire, which does not show any urgency to exit loose monetary policy. Nevertheless, the can has been kicked down the road to the spring wage negotiation around March before any changes are expected. USD/JPY immediately spikes but remains in consolidation as it is currently trading 0.12% higher at 142.56. U.S. Treasury Yields are lower across the curve, so as JGB yields. 

Regional equities are outperforming the U.S. 3 major equity indexes as China's November industrial profits rebounded strongly. Markets are still enjoying the holiday mood before year end and see limited range for major FX pair. The Antipodeans are sstronger against the USD with AUD/USD up 0.09% and NZD/USD up 0.11% , USD/CAD also slipped by 0.04% on steady oil and GBP/USD up 0.02% while EUR/USD fell by 0.04%.

 

 

 

 

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