Currency Reports

Bringing you a clear insight into, and analysis of, the movements and trends of EMEA currencies, the US Dollar, and the Japanese Yen from a dealer's perspective, brought to you by Mizuho Bank, Ltd.

Daily Currency Watch

Overnight comment in brief: 

17 April | Divergence

  • Policy divergence was in full view yesterday as Fed Chair Powell noted that it was taking longer than expected to get confident that rate cuts would be appropriate, while ECB President Lagarde said that unless something unexpected happens the ECB will start easing in June. 2yr UST yields briefly pushed above 5.0% in the wake of Powell’s comments and remained just below that level in Asian trade. Asian shares were mainly soft with China the main exception, enjoying a post-GDP bounce. Taiwan shares also moved higher. NZ CPI was a little firmer than expected, helping NZD outperform in Asian trade.
  • Japan’s seasonally-adjusted trade balance was a little weaker than expected in March, showing a deficit of ¥701bn. It remains the case that net exports will likely make a positive contribution to Q1 GDP. USD/JPY was stable around the 154.65 level for much of the session. The next BoJ meeting is on 26 April. The BoJ will need to factor a weaker currency into its near-term CPI forecasts, which will likely push them higher, as will the recent jump in oil prices, which will be exacerbated in JPY terms. The weaker the yen the more chance there is that the BoJ will have to hike to defend the currency. We doubt that this will happen in April but relative to our existing forecasts of a small hike in autumn, the risks are clearly that it may be either earlier or larger. 10yr JGB yields are pushing back up towards the early November high.
  • EUR remained soft in the wake of Lagarde’s comments yesterday and sits near the low of the session as Europe opens, sitting around 1.0620. UK CPI came in a touch firmer than consensus, with headline at 3.2%YoY (vs 3.1% expected) and core at 4.2%YoY (vs 4.1% expected). UK CPI will drop a lot further next month when the impact of recent reduction in the energy price cap hits the numbers. Nonetheless, services CPI is still running at 6.0%YoY, suggesting that the BoE will be in no rush to ease. GBP/USD edged off the lows in the wake of the data to sit around 1.2455.

 

Read the full report - 17 April 2024

Find our monthly CEEC FX Outlook Reports, and earlier Daily Currency Reports, below.

 

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