Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD strengthened amid negative US/China newsflow
The US dollar extended gains after negative US/China newsflow triggered broad EM currency weakness, particularly hitting CNH.
USD/CNH breached the key 7.20 level to trade at 7.21, with bearish positioning accelerating after disappointment from the NPC press conference.
Markets are closely watching Tuesday’s PBOC fixing after Monday’s fix (7.1786) came in below model-implied levels (7.1815), suggesting potential counter-cyclical factors at play.
In US equities, small caps continued to outperform despite the US holiday-thinned trading.
EUR/USD maintains its bearish bias with markets eyeing a potential break below 1.0650.
UK labor data to drive Sterling moves
UK labour market report for October will be released at 18:00 AEDT.
The statement from last month showed a decline in payrolls but a significant increase in the LFS measure of employment.
Carryover from a robust summer indicates that the quarterly rise will continue to be significant, even if the LFS measure of employment declines in the single month of September.
For four of the previous six months, payrolls have decreased, and in October, we anticipate another little decrease.
As a very low single-month print emerges, we predict a little increase in the LFS unemployment rate (from 4% to 4.1%).
Over the last four months, the average monthly rise in private sector regular pay has been 0.3%, and we anticipate this trend to continue into September.
This study also includes LFS data on pay growth for Q3 and employment by nationality, which will provide insight into the role of inward migration in creating employment growth.
German ZEW to test Euro sentiment
Germany ZEW, November will be released at 21:00 AEDT.
With the present conditions component rising to 17.7 from 13.1 before, and the expectations component expected to grow to -83.8 from -86.9 previously, we anticipate a substantial increase in the German ZEW for November.
Increases in the Sentix November poll and the significant increase in stock prices after Trump’s election are mostly to blame for this.
However, there is a chance that Trump’s win may negatively impact mood due to the potential imposition of tariffs and the negative effects on economic growth.
Our initial bull goal of 1.0935 and the outcome of the US election were rejected by the early bounce from trendline support, which caused the EUR/USD to whipsaw. The price action appears to be a second effort to reach a short-term bottom, even if the extension is lower.
US strengthened amid positive sentiment
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 11 – 16 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
