European Summary and Highlights 14 Dec
The USD lost a little ground against the EUR and GBP through the European morning, but was little changed against the JPY and AUD.
European morning session
The USD lost a little ground against the EUR and GBP through the European morning, but was little changed against the JPY and AUD. The NOK was the big mover, rising sharply after Norges Bank surprised the market with a 25bp rate hike. EUR/NOK fell 20 figures to 11.52 in response. EUR/CHF was also firmer on the morning, rising around 40 pips to 0.9500 after the SNB left rates unchanged but removed their bias to tighten and forecast an undershoot of their inflation target, while also indicating that they would scale down their FX sales. EUR/USD gained around 20 pips to 1.0910, and GBP/USD gained 30 pips to 1.2660.
Swedish CPI data was weaker than expected, particularly the core which showed a fall to 3.6% y/y in November from 4.2% in October, and EUR/SEK initially rose slightly in response, but fell back to opening levels near 11.20 by the end of the morning.
Asia session
USD continue to weakens on Thursday Asia session after the FOMC meeting show a lower dotplot in 2024. U.S. Treasury Yields tread lower across the curve while 10yr JGB yields are trying top close the opening gap. The signal of potentially early rate cut from the fund will accelerate the pace of yield differentials narrowing between the USD and JPY, thus carry trades will loss its attractiveness and led to rewind in previous long USD/JPY positions. Moreover, the Japan's ruling party introduces income tax breaks to alleviate the impact of price hikes and would likely support private investment growth in 2024. USD/JPY once trade to a session low of 140.94 before bouncing to 141.70 to trade 0.83% lower for the day.
On Thursday, we see the Australian labor report surprised to the upside significantly. The Australia November Employment change is +61.5K with expectation of +11K. While unemployment rate rose 0.1% to 3.9%, it was forced by the much higher participation rate of 67.2%, expected at 66.9%. The higher increase in part time jobs than full time did take the shine a bit from the report but all in all this is a very solid labor report. The AUD/USD is capitalizing on weak USD and strong labor report to trade 0.82% higher at 0.6714, NZD/USD initially dipped on disappointing GDP figure which shows a surprised contraction but managed to rebound to 0.6237 and is trading 1.03% higher, while USD/CAD slipped 0.36% to 1.3469. Elsewhere, EUR/USD is up 0.22% and GBP/USD is up 0.15%.