N America Summary and Highlights 31 Dec
The USD edged up in NY on Dec 31, except against the EUR that gained across the board.
N America Session
USD helped by lower than expected weekly jobless claims, with the clearest reaction on USD/JPY. USD also gained ground against the GBP and commodity currencies. EUR/USD more muted by end of year flows and also as 2yr U.S. Treasury yields only up 2bps on a knee jerk reaction – bond traders know the volatility of claims and given that Christmas could have caused a distortion. Elsewhere, Siliver fell 5% after new margin rises and chart pattern now look toppy.
With little news flow, traders did notice China announcement today of Yuan62.5bln for consumer trade in programs, as part of a wider initial Yuan300bln fiscal stimulus package for 2026 This is modest rather than aggressive and China is not going to boost global growth in 2026. USD/CNY is also in focus, with speculation that China could allow a move through 7.00. However, this could hurt competitiveness and China authorities will likely restrain any move in the near-term.
Europe Session
European trading saw the USD move sideways, with the FOMC minutes having failed to provide direction. Data will once again be key for Fed views and the USD into 2026, with traders seeing the standout being Jan 9 December employment report. GBP lost a little ground against the EUR on flows, with no news.
Traders views for 2026 are biased towards further USD losses, but at a smaller scale than 2025. The USD is not so overvalued as the start of 2025 and the Fed is expected to pause in H1 2026. Though the Supreme court ruling on reciprocal tariffs is expected to increase FX volatility it may not provide lasting direction. EUR is expected to remain good, helped by FX hedging of the huge U.S. equity positions by European funds. Views on the JPY are split between ongoing weakness versus catch-up on other USD majors – BOJ FX intervention will be a swing factor.