North American Summary and Highlights 22 Dec
Overview - USD weakness was the story of the day in North America, after USD consolidation in Europe. Year end flows were the driver, rather than any news.
North American session
The EUR had made gains in the Americas versus the USD, with no fundamental news behind the NY move other than end of year flows. EUR/USD is mixed multi week with the U.S. equity market helping USD sentiment, but the EUR still seen to be undervalued versus the USD and at risk of further FX hedging for huge portfolios in the U.S. by European investors. Tuesday’s Q3 US GDP is seen to be the last major number before 2026.
Other USD majors followed the move, with USDJPY dipping below 157.00 and charts now opening up scope for further JPY gains to 156.00. AUD/CAD and NZD also participated in the NY move, with AUD seen as a good story in 2026 due to Fed rate cut prospects versus steady to higher RBA rates.
European morning session
European trading sees the focus remaining on the JPY, after Japanese officials warned over FX intervention in Asia. The market is wary on BOJ intervention but the bias is that it is unlikely to occur over the Christmas period. Traders see USDJPY in a range 157.00 to 157.90 and a bias to 157.00, given some pre-Christmas trimming of positions.
Elsewhere, GBP gained ground versus the USD and EUR in Europe. The view is that rates could bottom at 3.50% given the BOE guidance that further rate cuts will now be a close call. However, the economist’s consensus is towards two 25bps cuts, on the view that UK economic weakness will prompt the MPC hawks to give ground and deliver more than discounted in the money market. Final GDP data had little to provide for GBP direction.