ACY Securities

The deviation from consensus in the US CPI data for October was minimal, with a mere 0.1ppt difference for both the headline and the core. However, it triggered the most significant sell-off of the US dollar since, coincidentally, the October CPI report in November 2022.

The recent trajectory of the US dollar has been marked by notable fluctuations, with last week's impressive rebound, almost fully recouping the losses of the preceding week. However, as the new week commences, the greenback finds itself on the defensive.

As we approach the end of the year, The Street is buzzing with the release of annual outlooks. I will release a comprehensive analysis but still a lot of work to be done so it will be published around early January.

After declining throughout most of September, the GBP has spent the past month consolidating at lower levels. Following the release of weaker nonfarm payrolls last Friday, Cable attempted to break higher but failed to surpass resistance from the 200-day moving average at around 1.2435.

The USD/JPY rate is hovering close to recent highs, despite a correction prompted by weak US data and lower yields. Following last week's across-the-board weakness in the US dollar due to a disappointing jobs report, this week witnessed a reversal, with all G10 currencies showing weakness.

In 2023, a significant aspect of my GBP narrative has been the elimination of idiosyncratic risks, signalling that the lows in GBP have stabilized. However, the focus on removing negative news rather than incorporating positive developments suggests a limitation on potential GBP rallies.

In the wake of the European Central Bank's decision to maintain its policy rates in October, there has been a discernible surge in the Eurozone rates markets, anticipating a series of rate cuts in 2024.

Will lower US yields prompt a hawkish shift from the Fed? Overnight, the foreign exchange rates have found stability, with EUR/USD hovering just above the 1.066 level and USD/JPY slightly above the 151.00 mark.

The three-month SONIA futures experienced a robust increase of approximately 10 basis points yesterday. This surge came in the wake of remarks made by the Chief Economist of the Bank of England, Huw Pill, on Monday evening.

In October, there was a lacklustre global demand. The global composite PMI declined from 50.5 in September to 50.0 in October, indicating a stagnation in global economic activity. New orders and new export orders in the manufacturing sector continued to show weak demand worldwide.

The recent drop in bond yields and the cautious approach taken by central banks have been viewed positively by the stock markets in the short term. However, my perspective suggests that equities will soon return to an unattractive risk-reward scenario.

The US dollar staged a recovery during the overnight session, rebounding after experiencing significant selling pressure at the close of the previous week. This rebound led to the USD/JPY pair reaching an intra-day high of 150.40, while the EUR/USD pair dipped below the 1.0700 level.