N America Summary and Highlights 29 Dec

North America 
NY trading has seen the divergence in the G10 currencies remaining with CHF and NOK the clear winner; EUR doing well and AUD/CAD and NZD on the defensive.  Traders indicate that this is flow related and not a wider view of divergence that will last into the first week of 2024.  The JPY made a recovery towards mid morning NY trading, as the volatility of the past few days continued.  

As well as data, the FX market is focused on clues over policy, with some wanting to see if the Dec FOMC minutes on Jan 3 provide hints on timing. However, in reality money market are so aggressive in the scale of cuts discounted that Fed officials (Barkin on Jan 3) will likely try to temper the early rate cut, especially as data suggests that the U.S. economy is not slowing rapidly.  This could cause a partial USD correction early next week.  

European session

Europe started off with a move lower on the JPY against the USD and EUR, while in contrast the CHF has moved higher against the EUR and across the board.  The EUR then gained ground against the USD, partially on EUR/JPY flows. However, this is not news driven but rather flow driven and traders find it difficult to see long lasting meaning in the moves. 

The mood is mixed going into next week.  The USD bears sees this week price action as a taster of a week USD in January, but others are more cautious given the prospect of some short-covering before the key U.S. data next week.