North American Summary and Highlights 12 December
Overview - The USD advanced led by the riskier currencies and also the CHF after a 50bps SNB easing. An as expected 25bps ECB easing saw a limited response.
North American session
Pressure increased on the riskier currencies through the North American session as equities slipped and UST yields advanced, the latter reversing an early dip on higher US initial claims. USD/CAD broke above 1.42, GBP/USD fell to 1.2670 and AUD/USD fell to .6365. EUR/USD saw little response to an as expected 25bps ECB easing, and subsequently oscillated around 1.05, before falling to 1.0465. EUR/GBP and EUR/CHF were however firmer near .8260 and .9335 respectively.
US initial claims rose sharply to 242k from 225k. November PPI was higher than expected at 0.4% on a surge in food but the core rates were subdued, 0.2% ex food and energy and 0.1% ex food, energy and trade. There was not much response to the data but USD/JPY fell below 152, before rebounding to end firmer near 152.65.
European morning session
Riskier currencies were generally a little lower through the European morning session. EUR/USD dropped around 20 pips to trade back below 1.05, while AUD/USD gave up 15 pips to trade back at 0.6405 after overnight gains.
EUR/CHF initially moved sharply higher on the SNB decision to cut rates 50bps, reaching a high of 0.9345 after opening at 0.9280, but fell back to 0.9308 by the end of the session. The market had seen a 50bp cut as a 65% chance ahead of the decision, although the majority of forecasters were looking for a 25bp move. The SNB was less explicit this time around about further cuts, save to repeat its long-standing mantra that it ‘will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term’, although it did also emphasise it as ready to intervene in the FX market if necessary.