North American Summary and Highlights 18 December
Overview - The USD advanced on more hawkish FOMC dots and a cautious tone from Powell after an as expected 25bps easing.
North American session
US data showed housing starts weaker than expected, down 1.8% to 1289k, but permits stronger than expected, up 6.1% to 1505k, with the surprises in both cases coming in the volatile multiples sector. A record Q3 current account deficit of $310.9bn was much wider than expected, up from $275.0bn in Q2. The USD made modest gains in the morning, though these faded as the FOMC decision approached.
The FOMC eased 25bps as expected but the dots were more hawkish, with only 50bps rather than 100bps of easing seen in 2025, and with inflation forecasts revised higher too, the 2% target now seen being reached in 2027 rather than 2026. The USD bounced and extended its gains through Powell’s press conference, though USD/JPY saw only limited movement in the press conference with equities falling. Still, USD/JPY was higher above 154.50 from 153.80 before the decision. EUR/USD fell over a big figure to near 1.0365 as did GBP/USD to 1.2575. USD/CAD was a big figure higher at 1.4430 while AUD/USD fell to .6225 from marginally above .63.
European morning session
A generally quiet European morning saw some small USD gains across the board, and some initial GBP losses, but these were reversed by the end of the session.
EUR/USD slipped around 10 pips to 1.0495, while USD/JPY gained around 15 pips to 153.60. EUR/GBP rose 10 pips after the UK CPI data, stopping just short of 0.8280, but fell back by the end of the session to be 10 pips lower near 0.8260. The UK CPI data was marginally softer than expected at 3.5% y/y for the core, but the headline was in line with expectations at 2.6%, and with both significantly higher on the month due to base effects, UK front end yields actually rose slightly through the morning.