Market Update 14/11/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

US equities saw late gains, with the key S&P 500 index rising 0.3%, while European equities edged down slightly, the Euro Stoxx 50 closed 0.1% lower, and the FTSE 100 inched up by 0.1%. Long-term bond yields increased across most major European markets, with the US 10-year yield also up 3 bps to 4.46%.

US CPI data for October in line with expectations offered some relief to traders concerned that a higher reading could delay US policy easing. The headline CPI rose 0.2% for the 4^th month in a row and increased 2.6% y/y marking the first annual acceleration since March. Meanwhile, the core CPI which excludes food & energy went up 0.3% for the 3^rd consecutive month. Minneapolis Fed President Neel Kashkari expressed confidence that inflation is headed in the right direction based on these figures.

Despite the market relief, the CPI report also highlights the slow, often frustrating nature of the inflation battle, as inflation has sometimes stagnated for months on its downward path. With headline numbers still elevated, inflation concerns remain, keeping some upward pressure on yields.

The USD continued its recent gains against G10 currencies, with the DXY now approaching its 2024 high set in April.

AUD/USD experienced a decline overnight, dipping below 0.65 for the first time since August. Today’s Australian employment data could significantly impact AUD/USD. Our Australian economics team anticipates a more modest employment growth of 20,000 in October, with the unemployment rate potentially rising to 4.2%. The general consensus among Australian economists is that the unemployment rate will remain at 4.1%. Should our prediction prove accurate, AUD/USD might see further decline today.

AUD/EUR saw a slight decrease overnight and is currently hovering around 0.6140. ECB’s Joachim Nagel suggested that Trump’s proposed tariffs could potentially reduce German GDP by 1.0%. Financial markets are anticipating consistent 25bp cuts from the ECB over the upcoming meetings. AUD/EUR may experience a further slight decrease today if the Australian unemployment rate increases. The 50-day moving average of 0.6126 serves as a support level for AUD/EUR.

AUD/JPY experienced a modest decrease overnight. Meanwhile, USD/JPY continued its upward trend, currently trading near 155.40. Since the US election, USD/JPY has risen by approximately 2.5%. The next resistance level could be at 156.67 (76.4% Fibonacci). It’s likely that Japanese officials will increase their warnings against JPY depreciation, which could potentially limit USD/JPY’s upside. The weaker JPY has led markets to anticipate an earlier Bank of Japan interest rate hike. Higher Japanese interest rates would likely support the JPY. A 25bp hike is now fully priced in by March 2025.

AUD/CNH decreased overnight and is currently trading around 4.70. USD/CNH is trading near 7.24, similar to its position at this time yesterday. The PBoC appears to be concerned about the weakness in CNY following President-elect Trump’s election victory. Yesterday, the PBoC set its daily CNY fix at 7.1991, 445 pips stronger than the Bloomberg estimate. This significant difference suggests the PBoC may be aiming to restrict the appreciation in USD/CNH, possibly to avoid increasing tensions with the incoming President before the implementation of tariffs.

Today’s economic calendar includes a speech by RBA Governor Bullock at the ASIC annual forum at 10:00 AM Sydney time, followed by Australian employment data at 11:30 AM Sydney time. Strong employment numbers could reinforce the RBA’s hawkish stance. Later in the evening, US PPI data will be released, which will help fine-tune estimates for the Fed’s preferred PCE inflation measure.

Mid-market rates.

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