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  • richard evans

USD remains soft, will the weakness continue

Good morning

Overall it was a bit of a nothing day in the currency markets yesterday, GBPUSD traded a range around 1.2600-1.2640, EURUSD 1.0925-1.0960 and both pairs remain within those ranges as I type. USDJPY did see a bit of movement, trading lower from 149.30 to 148.65, and overnight it traded below 148.00 but has since clawed its way higher back up to 148.65. An article from Nikkei about the potential for Japan to lift rates out of negative territory as early as H1 2024 perhaps contributed to a bit of the yen strength although. Rates have been negative since 2016 and Japan have not raised rates for some 17 years, so any change higher will be a major thing. As we know with yen though, timing is absolutely everything.

Key question for now is whether USD continues to show signs of weakness or whether the move is overdone. I think we are seeing the effects of a possible peak in US rates but the likes of GBP and EUR do not seem to be weakening despite comments from their central bank officials that are not too dissimilar to those coming from the Fed. We are moving away from how much higher rates will go to how long it will be before we see rate cuts. We have several central bank officials speaking today so maybe we will get a little more insight into their current thinking. For what its worth, Deutsche Bank have said we could see up to 1.75% in rate cuts from Fed in 2024, while Citibank technicals are looking for a softer USD across the board, looking at levels such as 1.2745 in GBPUSD, 1.1000 in EURUSD and 146.70 in USJPY.

RBNZ rate announcement is due overnight, no change is expected it will be interested to see if RBNZ follow the dovish outlook they gave in early November when they said they don’t see a further rate rise and that cuts could come earlier than expected. For the record NZDUSD is just shy of 0.6100, highest levels August, while GBPNZD is 2.0750. 2.0600 has been a key level over the past month, having tested and held on four or five occasions. Similarly, 2.0965 has capped the upside over the same period of time. A dovish RBNZ could be enough to send NZD lower.

The temporary ceasefire in Gaza has been extended by a further 48 hours, more aid is arriving in Gaza and more hostages are being released slowly, although Hamas says it may take a while for some hostages to be tracked down as they are held by other groups. Hopefully we will see the truce extended until all hostages are released.

Elsewhere, I’ve just seen news that India have finally managed to reach the workers who have been trapped in a tunnel for two weeks, with their evacuation hopefully taking place shortly.

And finally, I didn’t see the football last night but I understand it was another VAR failure with some rather unusual and certainly unpopular decisions, mostly in favour of Fulham over Wolves. I was never a great fan of VAR but do believe it has its place, however some of the mistakes they have made have been truly awful. Room for improvement, that’s for sure.

Have a great day

- 14.00 US house price index

- 15.00 US consumer confidence

- 15.00 Feds Goolsbee, Waller speak

- 15.45 Feds Bowman speaks

- 16.00 ECBs Lagarde speaks

- 17.00 BoEs Haskell speaks

- 18.30 ECBs Lane speaks

- 00.30 AUS monthly CPI

- 01.00 RBNZ rate announcement

- 02.00 RBNZ press conference

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