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  • richard evans

USD stays weak, Yen higher

Good morning

One week ago today the US CPI data was released which triggered something of a reversal for the US dollar. One could argue that the early November nonfarm payroll release that came out weaker than expected was the catalyst, but the bigger and longer-lasting move has been since the inflation numbers. GBPUSD is now 1.2535, EURUSD 1.0955, both only a few pips short of the highs seen in the early hours of this morning.

However for me it is USDJPY that shows the scale of the move. Last Monday we hit 151.90. As I type we are down at 147.15, a drop of over 450 points and just lower than the Oct 2023 low which came from what looked like intervention. We are now at the lowest levels seen since mid-Sept and technical traders will be getting excited about the approach to 147.00 and 146.70, both of which mark some decent levels.

I mentioned yesterday that Pimco said they had started building long yen positions, I wonder whether all those blips that looked like intervention was actually Pimco or the like selling enough USDJPY to spook the market just a little. Someone is going to be feeling happy. OK, no one in their right mind will say we’ve definitely seen the top in USDJPY, or indeed the peak in US rates, but for now it does feel that way.

AUD was little moved after hearing from both RBA Gov Bullock and the RBA minutes. Bullock reminded us that inflation remains a key challenge and Is likely to be do for another year or two, while the minutes showed RBA thought they had no choice but to raise rates at the last meeting to prevent inflation from ticking higher. More importantly, RBA are willing to raise again if needed. GBPAUD now 1.9050, almost exactly where it was this time yesterday, I’m a little surprised AUD didn’t push higher on the back of the comments.

USDCAD is currently 1.3725 ahead of Canadian inflation numbers this afternoon. Earlier this month we heard from BoCs Macklem who sounded pretty hawkish, indeed USDCAD fell from the 1.3900 area down to 1.3635 in the first few days of November, reflecting the hawkish tone. The pair is now off those lows despite this USD weakness. I’d normally look for an overnight option play but will give it a miss this time, however we are seeing a series of higher lows and lower highs which means the range is getting narrower. Something will have to give at some point.

PBoC surprised with their latest USDCNY fix. It was struck at 7.1406, the lowest level since early August but reflects recent PBoC fixes which are struck well below levels traded in the market. They will be grateful for this spell of USD weakness.

One piece of news I missed over the weekend was the SpaceX Starship launch which didn’t go exactly to plan after suffering what Musk calls a ‘rapid unscheduled disassembly’ just eight minutes or so into its flight. Yes, that’s his wording for an explosion. The SpaceX engineers sounded remarkably upbeat, boosted by the fact it got up to 140km, so did reach space which comes in at around 100km. As such it got a lot further than the previous attempt in April and also now holds the record for the most powerful rocket ever developed to leave earth.

They are still a long way short from getting to the moon, something US managed over 50 years ago and something India managed with a tiny budget if you believe their numbers. Still, the ultimate aim of Starship is not just a moon landing but more about a trip to Mars. I’d love to see one of these take off. The Starship and booster stand some 120m tall at take-off, powered initially by 33 raptor engines. Must be an incredible sight.

Just realised that its December next week. That’s coming around pretty quickly. No doubt I’ll soon be asked to drag the tree out of the attic, never sure why I don’t look forward to that as I like it when its up. Perhaps its just the thought that it’ll all go back to where it was in a few weeks. Still, at least its fake and doesn’t drop its needles. I’ve got enough leaves to deal with. The garden looked fairly pristine at the weekend after I got the leaves up, now it looks as though I had never bothered. And still the trees look full of leaves. Ah well there are worse things to worry about…..

- 13.30 CAD CPI

- 15.00 US existing home sales

- 17.15 ECBs Schnabel speaks

- 19.00 FOMC minutes

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