Today's FX Comment

November 15, 2024?

Good morning and TGIF. You know walking around downtown after work last night you could really feel the excitement among the Taylor Swift crowd and I admit, I almost felt a little FOMO. Then I remembered, I have tickets to see the KC-Bills game in Buffalo this weekend. FOMO gone! I get to see the best NFL game of the year so far and T-Swift will probably be there as well....

The market is limping into the weekend. Fed Chair Powell leaned a bit more hawkish yesterday and the euphoria stocks felt about a Trump win and thoughts of lower taxes and deregulation have faded away and what we are left with are fears of higher debt and inflation. That is leading to higher yields and the pricing in of fewer Fed cuts which is in turn weighing on risk sentiment and equities. Overnight, Asian indices were mixed with stocks in Australia and Japan higher while markets in mainland China were under pressure again. We had a data dump out of China and while I guess it's no surprise house prices remain under pressure elsewhere there were signs of economic life with retail sales running close to 5% YoY easily topping expectations. I suppose it's hard to get too excited about the stronger data when thoughts of Trump tariffs lurk in the background though.

European equity markets are mostly lower this morning but losses have been pretty limited. Again, hard to generate a lot of positive sentiment with questions marks around German politics, sluggish growth and uncertainty about what a trump administration might bring. Futures point to losses on the open in North America. Higher yields don't help and neither do thoughts of a less aggressive Fed. I also think most realize that tariffs probably aren't a good thing and that trade wars are bad for business. If equities continue to sell off post-inauguration I wonder how long it takes Trump to back off the harsher rhetoric. For today, we get US retail sales, recall last month it came in better than expected and some attributed it to "pre-buying of essentials" ahead of the recent hurricanes. I wonder if we see some give back in today's data. It would be ironic to get a soft print right after Fed Chair Powell talks about economic strength and the market feels pretty hawkish about the Fed.

FX thoughts:

JPY - Japanese GDP was better than expected last night with private consumption at its strongest level in more than two years. Maybe we're inching closer to that BOJ rate hike. I think you need to be careful if you are long USDJPY, the verbal rhetoric is ramping up with Japan's Finance Minister Kato reiterating that he is seeing one sided, sharp moves in FX markets and that officials are watching with an "extremely high sense of urgency". The market is also a bit wary after it was announced that that BOJ Governor Ueda would be giving a previously unscheduled news conference this coming Monday. You have been warned.? Resistance 156 and 157.20.

AUD - No real change here. The RBA will be cutting less than the Fed and I think the move lower in Oz is overdone but at the moment it remains more about Trump trades and USD strength. We are right on support between .6450-.6465 again this morning, next downside level is .6400 then its the .6350 low from the early August panic selloff.

GBP - UK GDP data was a touch softer than expected this morning, but it won’t change the BOE’s no cut path next month. On a more positive note, Chancellor Reeves speech at Mansion House called for Britain to rebuild ties with the EU. She also told financial regulators to increase the risk in the UK financial services sector, claiming that rules drawn up after the GFC had gone too far and were stifling growth. Sounds positive for Sterling. We should find support in Cable at 1.2615.

EUR - A bit of a bounce for the Euro this morning but the story hasn't changed. The ECB might be more aggressive than the Fed, Trump might slap tariffs on Europe, China may struggle hurting EU exports but there are some "maybes" and "potentials" in there and the Euro has come a long way from 1.1200 in a short period of time. Always dangerous to catch a falling knife but again, in the near term maybe things are a bit stretched here. Support 1.0500 and 1.0440.

CAD - Steady buying interest all day yesterday pushed USDCAD through 1.4040 resistance but things have stabilized somewhat this morning and we are back at the level once again. Obviously Retail Sales will be a short term driver but it sure does feel like USDCAD is getting a bit stretched up here. Six big figures off the 1.3420 low In a short period of time. Overdue for a pullback but maybe Trump trades keep rolling into US Thanksgiving. 1.4120 is the next topside level.

Have a great weekend.

Good luck.