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FOREX: USD Index Slips, EURGBP Notable Outperformer Following Budget

FOREX
  • Despite the firmer-than-expected ADP jobs report and confirmation of solid GDP growth data in the US, the dollar index sits 0.25% in the red on Wednesday as we approach the APAC crossover.
  • EURUSD strength mainly stemmed from higher-than-expected GDP & inflation data in Germany, boosting the pair to trade back above 1.0850 and extend the bounce to near 1% from Tuesday’s 1.0769 lows.
  • Despite yesterday’s brief test below 0.8300, EURGBP (+0.73%) has reversed higher today and is a notable outperformer on Wednesday. Note that price action today and activity on Oct 18 continue to highlight a possible early reversal signal and if correct, a key short-term base.
  • The moves have been underpinned by the firmer-than-expected German figures, and come despite the upward pressure on UK gilt yields following the UK budget. A close at current levels would provide the first close above the 20-day EMA (intersecting at 0.8348) since early October. Key trend resistance for the cross is unchanged at 0.8434, the Oct 3 high.
  • Elsewhere, G10 currencies have remained relatively stable as we approach more significant risk events to finish the week, namely the BOJ meeting, Eurozone inflation data and the US employment report.
  • Higher core yields have weighed on the emerging market basket with the likes of the Hungarian Forint and Latin American currencies underperforming. Notably, USDMXN rose to a fresh year-to-date high of 20.2278 as markets continue to consider the implications of the US election and domestic reform uncertainties.
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