FX Daily: USD recovered some lost ground
USD recouped some of last week’s losses on a Fed rethink and weaker risk appetite. DXY appreciated 0.6% to 106.88 in the overnight session, propped up by higher US bond yields and weaker stock markets. Fed Vice Chair Lael Brainard clarified that the guidance to move away from 75 bps hikes did not imply a weaker resolve at the Fed to control inflation. Fed Governor Christopher Waller said that rates would keep going up and stay high until inflation gets closer to its target. Today, Philadelphia Fed President Patrick Harker will probably consider a 50 bps hike as a significant move.
As the UST 10Y and 2Y yields rose to 3.85% and 4.39% respectively, Dow and S&P 500 fell 0.6% and 0.9% respectively. However, Nasdaq Composite fell harder by 1.1% from high-profile job cuts by Big Tech. The New York Times reported that Amazon was considering culling 10,000 jobs. Facebook parent Meta announced 11,000 job cuts while Twitter eliminated 3700 jobs. Hence, investors will be looking for cracks in US consumer demand in this week’s earnings reports by retailers Walmart, Target and Home Depot, and tomorrow’s retail sales data by the Commerce Department.
USD/CNY fell a third session by 0.4% to 7.07, down sharply from the year’s highest close of 7.3050 a fortnight ago. The meeting between Chinese President Xi Jinping and US President Joe Biden at the side of the G20 Summit cooled Cold War fears. Both leaders agreed to resume communications by senior officials, starting with a visit to China by Secretary of State Antony Blinken early next year. The fixing for USD/CNY plunged to 7.0899 from 7.1907 last Friday after Beijing refined the guidelines for its Covid Zero policy and announced comprehensive measures to support the property sector. The above positive developments and the greenback’s retreat also led USD/HKD to retreat from 7.85, the ceiling of its convertibility band, to 7.8350. However, given the weaker market sentiment overnight, we expect the USD to consolidate against the CNY and HKD too.
Quote of the day
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15 November in history
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