The roller coaster ride for the United States Dollar continues this morning as USD is trading weaker against all G10 peers.
Overview
This morning’s loss, though, does not erase the gains the Dollar saw throughout yesterday’s session, and the Buck is still stronger on this very young month. Choppy trading has dominated flows in the last two days as traders prepare for yet another crucial employment release out of the US on Friday morning. Due out today is the JOLTS job opening survey for the month of October, likely to be a marred release as well due to the string of severe weather conditions and strikes that disrupted October’s payroll data. US equities, for their part, continue to run up the score, with the S&P 500 notching its 57th record close of the calendar year yesterday. Though FX flows are quite volatile, equities are not seeing the same choppy trading materialize and the VIX ‘fear index’ is well below historical averages.
Geopolitical news, out of Europe in particular, continues to dominate flows this morning. France’s far-right National Rally party yesterday backed a vote of no confidence in the French government after Prime Minister Michel Barnier’s administration used a constitutional method to bypass Parliament and pass its annual budget. The vote of no confidence is schedule to take place tomorrow, which could in effect topple the French government and severely hamper the Eurozone’s second-largest economy, only behind Germany. French government bond yields have reached their highest spread over their German counterparts in 12 years, since the height of the Eurozone economic crisis. Data releases in Europe, too, have been quite lackluster over the last month, and largely paint a picture of a regional economy just barely avoiding a recession. In response, the European Central Bank is reportedly considering a supersized 50 basis point cut at its meeting next week, keeping EUR depressed against USD though there is a slight rebound this morning.
The Dollar is likely to remain in mixed territory against the rest of the G10 through this week as traders await key payroll and employment data Friday morning. There is some risk of an upside surprise to payrolls after October’s noisy reading, but in all likelihood the US economy will probably show a slowly but steadily cooling labor market.
What to Watch This Week…
- S&P Global Composite PMI, Wednesday 8:30AM
- Eurozone PMI, Wednesday
- Non-Farm Payrolls, Friday 8:30AM
- Eurozone GDP, Friday
- Monex USA Online is always open
CHF ⇓
Swiss Franc, benefiting from some haven flows, is gaining ground back against USD after a dismal performance yesterday, clawing back a third of a percent of value. Swiss inflation data, released early this morning, showed that prices rose more than expected in November and boosted headline inflation up to 0.7%. The Swiss National Bank’s inflation target for inflation is the 0%-2% range, though, and this reading is still toward the lower end of the spectrum, placing the central bank between a rock and a hard place as policymakers try both to keep inflation afloat and keep the currency trading weaker than recent highs.
JPY ⇑
Japanese Yen’s recent run of strength is continuing this morning, gaining back roughly half a percent of ground against USD overnight. Bank of Japan Governor Kazuo Ueda continues to lean hawkish in recent statements, and has repeatedly cautioned markets against what the central bank sees as ‘excessive and speculative’ FX movements. Current market odds of a rate hike from the BoJ later this month are squarely a coin flip, standing at 55%. Japanese Yen may also be benefitting from some hedging flows against rampant Dollar strength over the last month, seen by some traders as an effective hedge against USD longs elsewhere
