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Greenback Weakness Prevails Following Key US Data

FOREX
  • Despite early USD strength on Friday, weaker US wage growth combined with a large miss for ISM Service activity have been the main drivers for a substantial greenback turnaround, resulting the in the USD index looking set to post a 1.1% decline on the day.
  • Greenback weakness across the board was evident throughout the US session with the greenback pressing on intra-day lows approaching the week’s close. With a substantial recovery for major equity indices, AUD (+1.85%), NZD (+1.88%) and GBP (+1.53%) are the most notable performers in G10 amid the more optimistic sentiment. This is also filtering through to significant gains for some EM currencies, notably the Brazilian Real and Colombian Peso, both rallying over 2%.
  • Additionally, the Onshore Yuan has traded to fresh trend lows and breached its 200day moving average against the USD in the process. It is worth highlighting that this is the first test of this average since April 2022. This follows an earlier break of the same average for USDCNH, which has gathered downside momentum across the session.
  • Another significant round trip for USDJPY, which after briefly piercing above key resistance at 134.50 before the data now finds itself gravitating towards the 132 handle, substantially trimming the week’s advance following an impressive 525 pip weekly range.
  • With expectations for the next Fed hike size in question, focus turns to Chair Powell who speaks next Tuesday, ahead of the important December CPI print which is due Thursday.
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