Market Update 15/11/2024

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 dipped overnight, with the S&P 500 falling 0.3% and the Nasdaq and Dow showing similar declines. In contrast, the Euro Stoxx 50 gained 2.0% and the FTSE 100 rose by 0.5%. Meanwhile, the yield on the US 10-year bond dropped 5 bps to 4.41%.

Initial jobless claims dropped to their lowest level since May, down by 4,000 to 217,000, indicating strong demand for workers and reducing any urgency for the Fed to consider rate cuts.

Additionally, October’s PPI data came in slightly stronger than expected, with both the headline and core measures increasing. The index excluding food and energy rose 0.3% month-over-month and 3.1% year-over-year. Key components contributing to the PCE deflator were stronger than anticipated, prompting analysts to raise their core PCE deflator forecasts to 0.3%. Recent inflation data show no further decline in inflation, and the projected annual core PCE rise of 2.8% year-over-year would mark the highest since April.

Fed speaker Kulger mentioned that with the ongoing but slowing trend in disinflation and a cooling labor market, it’s important to stay focused on both aspects of the Fed’s mandate. Meanwhile, Fed’s Barkin acknowledged that the central bank has made “great progress” but stressed that officials can’t yet claim success.

Overall, the USD hit a new high and is up 2.5% this week. While technical indicators show the USD is significantly overbought and could potentially return to pre-election levels, with markets scaling back rate cut expectations, it would likely take weak economic data to trigger that kind of pullback in the near term.

NZDUSD dropped below its solid support level of 0.5850 to 0.5840, entering a potential buy zone, supported by an uptrend line dating back to 2020. It may be challenging to break below 0.5800. Current support levels are 0.5860, 0.5820, and 0.5800, while resistance levels are at 0.5920 and 0.5955.

NZDAUD is slightly stronger & traded to 0.9070, which is a bit surprising. It wouldn’t have been surprising to see this pair below 0.9000, especially as AUD rates are expected to hold steady for a while, and NZ rates may soon fall below Australian rates after 27^th November, the first time since 2013 and we haven’t seen this kind of rate differential in 2-year swaps. For now, it remains within range, with support at 0.9025 and 0.9000 and resistance at 0.9100 and 0.9130.

NZDEUR weakened to 0.5555. The ECB minutes indicated the potential for multiple consecutive rate cuts. Earlier this week, Finnish central-bank governor Olli Rehn noted that disinflation is “well on track” and that the growth outlook “seems to be weakening,” supporting further policy easing next month. Latvia’s Martins Kazaks added that a gradual reduction in borrowing costs is the “most appropriate” approach at this time.

Today, NY Fed President Williams and BoE Governor Bailey are scheduled to speak at separate events. This afternoon, Japan’s Q3 GDP and China’s monthly economic indicators will be released. Later in the evening, the main highlights will be the UK’s Q3 GDP and US retail sales data.

Here are the latest mid-market rates:

Chart of the day