EM Market Report US Dollars Cash

Dollar rebound starting?

Thanim Islam
Thanim Islam 29 November 2022

- Dollar moves yesterday indicating further gains?

- China announce stimulus measures for property market

- German inflation in focus

Yesterday

Risk-off sentiment drove markets yesterday, with the narrative from China taking the lead. AUD and NZD were the biggest losers on the day, with USD and the JPY being the preferred choice for markets.

Ahead of key US data this week and a speech by Fed Chair Jerome Powell tomorrow, demand for USD was further exacerbated by hawkish comments from Fed members John Williams and James Bullard yesterday.

We mentioned yesterday given the negative sentiment on USD over the course of November that if the narrative from Fed Chair Powell and/or economic data supports a hawkish Fed, along with a change in risk sentiment, then we could see a reversal of month weakness of the USD.

Similarly with the EUR, recent gains for the single currency have been caused by thoughts of China coming out of a lockdown. If those hopes start easing then we would expect the EUR to weaken as well.

GBP vs G10

Against rates at 17:00pm, 28.11.22.

Currency pairs

Daily move (%)

GBPNOK

0.55%

GBPAUD

0.37%

GBPNZD

0.25%

GBPSEK

0.06%

GBPCAD

-0.12%

GBPEUR

-0.33%

GBPDKK

-0.35%

GBPCHF

-0.38%

GBPUSD

-0.42%

GBPJPY

-0.83%

Today

Market rates

Today's interbank rates at 09:44am against sterling rates yesterday.

Euro

€1.158

US dollar

$1.201

Australian dollar

$1.786

South African rand

R20.43  

Japanese yen

¥165.9

Data points

EUR Consumer Confidence - Nov

Consensus: -23.9

Previous: -23.9

EUR German CPI YoY - Nov

Consensus: 11.30%

Previous: 11.60%

CAD GDP - Q3

Consensus: 0.40%

Previous: 0.80%

USD Consumer Confidence - Nov

Consensus: 100

Previous: 102.5

USD House Price Index - Sep

Consensus: -0.70%

Previous: -0.70%

Speeches

  • EUR – ECB De Guindos, De Cos

  • GBP – BoE Mann, and Governor Bailey

Our thoughts

Overnight, sentiment swung back in the favour of risk after further measures were announced in China to support the property market, causing the USD to give up some of the gains yesterday. This morning, Chinese health authorities held a press conference regarding Covid policies and stated that authorities are constantly adjusting Covid policies, and that they must reduce the inconvenience caused by any outbreaks on the economy. Authorities also urged the elderly to get vaccinated. The announcements perhaps weren't as optimistic as markets were expecting, and the overnight risk-on mood hasn’t quite followed through this morning.

Risk narrative will still be the driver of markets today, as we wait to see what the inflation data is from Germany and how that will guide the ECB’s rate hike in December. Currently markets were pricing a 50% chance of a 0.75% hike in December yesterday, but that has eased this morning. A 0.75% hike should be EUR supportive.

Otherwise USD is still the focus for this week, and whether the data points later this week will cause a bounce back for USD going into year-end.

Chart of the day

USD is in focus this week, and ahead of key economic data from the US this week and optimism abating about China easing Covid policy sooner rather than later, are we near the top end of the recent surge higher for GBPUSD?

Price action yesterday suggests that the sellers are in control, and should data be supportive this week then we could well see GBPUSD easing off these highs.

29112022 cotdSource: Bloomberg Finance L.P.

Have a great day.