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Equity Weakness Underpins Moderate USD Bid, GBP Consolidates Post-CPI Decline

FOREX
  • Sterling remains the weakest G10 currency, holding the vast majority of the post-CPI losses, after inflation slowed markedly faster than forecast in November. Core CPI posted a 0.6ppts drop to hit a new post-COVID low of 5.1%. Monday's lows of 1.2629 provided firm support on the session and remains the notable downside level for the pair. GBPUSD 0.66% decline is reflecting the retracement in yields across both STIR and Gilt markets, with BoE rate cut pricing for 2024 extending by nearly a full 25bp reduction Wednesday.
  • Despite a bounce for the broad dollar index across European hours, gains were moderated throughout the US session, with overall G10 ranges remaining contained amid a lack of tier-one data and as we approach the holiday season. Some late pressure for equities is underpinning the advance for the DXY (+0.26%) as we approach the APAC crossover.
  • This late pressure on stocks has seen AUDUSD slip to the worst levels of the session, down 0.32%, however the uptrend for the pair remains firmly intact and Tuesday’s gains reinforced current conditions. This marks an extension of last week’s move higher and the break of resistance at 0.6691, the Dec 4 high and a bull trigger. Overall, scope is seen for a climb for a climb towards the 0.6800 handle and 0.6821, the Jul 27 high.
  • JPY had initially been the firmest currency in G10, reversing a good chunk of yesterday's post-BoJ weakness. USDJPY printed a session low of 143.27, after peaking on Tuesday at 144.96. A lack of momentum and the slightly more optimistic feel for the dollar, prompted a gradual recovery to 143.90 at typing.
  • Final US GDP reading for Q3 will cross tomorrow, along with core PCE price index data, Philly Fed manufacturing and jobless claims figures. Canadian retail sales data is also scheduled.
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