USD/JPY still eyeing 111.00+ as mid curve yields press higher. Sweeping gains for the USD this week, as the post Trump victory reaction from the financial market has been some way off what was expected in the pre election run up last week.
The abrupt turnaround in the greenback and stocks last week were extended by some way, with fund managers offloading US treasuries alongside USD bulls feeding off the ‘steeper’ Fed funds rate (hike) path which has accelerated in line with the prospective fiscal stimulus plans proposed by the President elect. 2-5-10yr yield has been leading the curve higher, leading the USD/JPY rate to highs through 110.00, with the next target area in the mid 111.00’s in the line of fire as we head into the weekend.
EUR/USD losses are now forecast to extend through 1.0500 at some stage, with parity now being touted as the European political landscape has also soured – starting with the Italian referendum early next month. Cable is now under threat of retesting down towards 1.2000 again with key support at 1.2350-00 now being challenged, with EUR/GBP also getting a lift today as news that the Scottish and Welsh govts could intervene in the Supreme Court appeal on Article 50.
EUR/GBP spiked through .8600, with the USD rate likely to dictate from here. In the commodity currencies, AUD/USD is now ending the week at the lows, taking out .7400 and already in the lower .7300’s.
NZD/USD is likely to pressure .7000 again, though this looks inevitable in the weeks ahead – unless the USD turns around significantly. USD/CAD has retested the upper 1.3500’s again, but as seen earlier in the week, pre-1.3600 looks well offered – especially with oil prices stable. OPEC members insist talks are ‘going well’. Looking to next week, the Fed minutes come out the day ahead of the Thanksgiving on Thursday, so expect a quiet latter part of the week.
In the UK we have the Autumn statement from Chancellor Hammond, while Q3 GDP is due at the end of the week. German Ifo is the headline EU release, but will be of limited interest as the Italian referendum will attract greater focus. PMIs in the EU and the US also feature.