Today's FX Comment

November 20, 2024

Good morning. I read today that a class action lawsuit has been launched against Netflix over the buffering problems that millions of subscribers experienced while trying to watch last week's Mike Tyson-Jake Paul fight. They should probably launch another lawsuit over the fact that it was even considered boxing at all, terrible fight.?

Yesterday it was all about fears of a nuclear war after Russia changed its doctrine. Stocks managed to shrug it all off and trade higher though and what a difference a day makes. Today, those fear have been lessened after Russian Foreign Minister Lavrov stated that it is Russia's position that a nuclear war won't happen and that nuclear weapons are a deterrent. The fear level dropped further after Reuters reported that President Putin is willing to discuss a ceasefire in Ukraine with President-elect Trump. That being said, Ukrainian President Zelenskyy has said his country could face 100,000 North Korean troops in the near future so this war is far from over. Putin is trying to put himself in the best bargaining position possible ahead of the Trump administration I suppose. At any rate, the market's focus will be firmly on Nvidia earnings after the bell today. Nuclear winter fears will just have to wait for another day.

Overnight, Asian equity markets were mixed with stocks in Hong Kong and mainland China trading higher. As expected, China left both the 1yr and 5yr LPRs unchanged at 3.1% and 3.6% while the PBOC continues to fix CNY stronger than market estimates (7.1935 last night).

European indices are all in the green today? shrugging off some hotter than expected inflation data out of the UK. I would guess the thought of a potential ceasefire in Ukraine or at the very least a decrease in nuclear fears has helped to lift sentiment this morning.

Futures point to gains on the open in North America despite the fact that yields have moved higher (2yr +2bps/10yr +4bps). I think the UK inflation data has fed into the move higher in yields as have reports that Kevin Warsh may not get the US Treasury Secretary job after all with reports that Appolo's Marc Rowan is now the front runner. We may have that decision later today. Really though it will be Nvidia that sets the tone later this afternoon. The company always has an extremely high bar to beat so get ready to hear all about Blackwell shipments. A decent earnings report and some healthy guidance will be an early Christmas gift for the stock market and set the tone into year end.

FX thoughts;

JPY - The Yen gained ground on risk off yesterday so it makes sense that with Russia fears lessened today the currency has drifted lower. I would exercise caution if you are long USDJPY, we are entering the intervention zone, verbal at first but it feels like we are getting closer to actual. Resistance 156 and 157.20.

AUD - The Oz continues to chop around, on one hand you have support from a central bank that stands out as one of the more hawkish out there and improving relations with China, on the other you have those concerns about Trump tariffs, their impact on China and the knock-on effects on Australia. Support .6440, resistance .6580.

GBP - UK inflation data was released this morning and it was hotter than expected with core re-accelerating to 3.3% YoY. Maybe more concerning for the central bank services inflation remains very sticky at 5% YoY. Add to that reports that say the UK’s statistics agency has potentially underreported the number of people employed by up to 1 million. You think the Fed will slow play rate cuts, how about the BOE? Feels like Sterling should be higher. Support in Cable at 1.2615, resistance at 1.2770. I prefer short EURGBP.

EUR - I would have thought that reports of Putin being willing to negotiate a peace deal with Trump would give the Euro a bit of a lift but not so today. Thoughts of Trump tariffs and thoughts of a more aggressive ECB continue to weigh on the currency. The ECB's bi-annual Financial Stability Review also noted that rising global trade tensions threatened financial stability and that economic growth was still fragile which of course does not help sentiment either. Support 1.0500 and 1.0440, 1.0640-50 is resistance.

CAD - Support is decent between 1.3960-80, it was tested yesterday/overnight and has held so far but you know the market is quite short the Canadian Dollar and you know that December has tended to be a decent month for the currency. Maybe those two things are lining up for a move lower in USDCAD post-US Thanksgiving? There will be some more support at 1.3830 but after that it’s 1.3740. Resistance 1.4040.

Good luck.