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Broad USD Weakness Extends Following FOMC Minutes

FOREX
  • Despite a firmer start for the greenback to start the week, the USD index extended Tuesday’s reversal lower and looks set to post a 1% decline on Wednesday as we approach the APAC crossover and the US Thanksgiving Holiday.
  • Some highlighted the increase in initial jobless claims as well as weaker S&P PMI data as underpinning the USD weakness. Particularly, input cost inflation softening for the sixth month running, increasing at the slowest rate since December 2020 could be supporting the bid for US Treasuries.
  • G10 FX strength was fairly broad based and substantial with GBP, NZD, SEK and NOK all rising in excess of 1.5% against the greenback. Both the AUD and JPY are also seen 1.25% firmer with a slightly less buoyant Euro that grinds back to the 1.0400 mark.
  • A combination of lower oil prices as well as geographical proximity to the US sees the Canadian Dollar underperform across G10, with USDCAD close to unchanged on the session.
  • Similarly, USDCNH is actually higher as the country is seeing near-record numbers of Covid cases, spurring major cities from Beijing to Shanghai to revert to broad restrictions on people’s movements and mass testing exercises to contain swelling outbreaks. Furthermore, reports of protests at China's iphone factory acted as an additional CNH headwind.
  • In emerging markets EURHUF spiked substantially as German newspaper FAZ reported that the EU Commission are to recommend freezing EU7.5B of Hungary funds. EURHUF rallied from around 406 to 412 on the news, narrowing the gap with touted resistance at 416.03, the Oct 24 high.
  • German IFO data and BoE Speakers precede the release of the ECB Monetary Policy Meeting Accounts on Thursday.
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