Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

FX Daily: We’ve Got Our Eye On You

By ING Economic and Financial AnalysisForexDec 08, 2021 12:38AM ET
FX Daily: We’ve Got Our Eye On You
By ING Economic and Financial Analysis   |  Dec 08, 2021 12:38AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Friday saw the US Treasury release its delayed report on currency manipulation. We'll have a more detailed look later, but headlines suggested the US Treasury continues to work with Switzerland, Taiwan, and Vietnam on FX intervention issues. The Treasury is also closely monitoring the FX activities of Chinese state banks.

USD: US jobs data keeps hawkish Fed bets alive

Friday's November US jobs report has kept the narrative alive of the Fed wanting to push ahead with quicker tapering and early tightening even as the full effects of the Omicron variant are unknown. As we were noting last week, the dramatic flattening of the US 2-10-year Treasury curve typically sees underperformance of the commodity complex (true in G10), while the Japanese yen and Swiss franc were the only two currencies stronger against the dollar over the last week.

This week could see a subtle shift in direction. Friday will see the US November CPI release, expected at a new cyclical high of 6.7% year-on-year with upside risks. That should keep short-dated US yields and the dollar supported.

But weekend comments from Chief US Medical Advisor, Anthony Fauci, that Omicron looks more transmissible but less severe could provide some breathing room for risk assets. That could mean somewhat of a comeback for the commodity currencies of Australia, which had it's policy meeting yesterday, while Canada's is today, plus Norway. This could potentially see a reversal of the euro and Japanese yen cross rates, with both currencies having performed well in a risk-averse environment.

On a quiet Monday, investors were presented with the US Treasury's semi-annual report on currency manipulation. We'll have more detailed analysis on this later, but a quick overview suggests: i) the Yellen Treasury favored engagement over tariffs thus no country was named a manipulator, ii) The US Treasury was engaging with Vietnam, Taiwan, and Switzerland over FX intervention practices, and iii) was closely monitoring the FX activities of Chinese state-owned banks.

The Swiss National Bank has certainly been less active in intervening this year and as we have seen, there no longer appears to be any support line in the sand for EUR/CHF.

EUR: Rangebound

The European Central Bank's trade-weighted euro has fallen just over 5% this year and despite the recent correction is only just 0.3% off the low for the year. A dovish ECB, plus Europe's greater exposure to the global manufacturing cycle, along with vaccine hesitancy, have all contributed to the euro's poor performance. We have just seen a terrible German factory goods orders number for October and one suspects the only help that the euro can get before year-end is if the ECB turns less dovish.

As above, range-bound trading into the big central bank meetings of Dec. 15/16th suggests EUR/USD may be bound by a 1.1180-1.1380 range. Elsewhere this week look out for tightening in both Poland and Hungary as both seek to insulate against any further currency weakness.

GBP: Saunders sell-off

When one of the most outspoken hawks on the MPC says he needs to think twice about voting for a rate hike in December, markets take notice. Remarks from Michael Saunders on Friday certainly hit sterling and saw the UK money market curves adjust sharply. It is a quiet week for UK data and speakers, just October monthly GDP and October industrial production, but a Bank of England inflation attitudes survey this Friday should prove useful ahead of the 16 December BoE rate meeting.

Cable has decent support at 1.3170/3200, so let's see whether this can hold as the bottom of a near-term range.

CAD: Time for a recovery on the crosses?

The Canadian dollar has been hit hard by the Omicron news and the sharp correction in oil, yet the domestic Canadian story remains strong. Friday's release of Canadian employment data was strong across the board and suggests the Bank of Canada can prove one of the more optimistic central banks when it meets on Wednesday this week.

EUR/CAD has enjoyed a sharp 2.5% correction since late November, but we expect it to return to the 1.42 low.

Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Original Post

FX Daily: We’ve Got Our Eye On You

Related Articles

Marc Chandler
Ugly Friday By Marc Chandler - Jan 21, 2022

The reversal in US equities yesterday set the tone for today. Among the large bourses, only Hong Kong escaped the pain today. It was the sixth session of the past seven that the...

InstaForex Group
EUR/USD Could Come Under Pressure By InstaForex Group - Jan 21, 2022

During a brief retracement from 1.1315, EUR/USD climbed to the upper border of the trading range between 1.1230 and 1.1370. As a result, traders cut on long positions that pushed...

FX Daily: We’ve Got Our Eye On You

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email