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Nov 11 - 05:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD's Post-US CPI Rally Eyes August Highs

By Randolph Donney  —  Nov 11 - 01:55 PM

The dollar tumbled on Friday, extending its wipeout in the wake of Thursday's below-forecast U.S. CPI, with EUR/USD rising 1.4% and threatening August highs after a stunning 4.2% two-day advance.

The market is pricing in a roughly 4.9% fed funds peak next year, about 20bp below recent highs.

Most Fed speakers have said they need to see more disinflation progress before ending hikes, but the market now largely is priced for 50bp of rate cuts from a May-June peak until the end-2023.

University of Michigan's November consumer sentiment was far weaker than forecast, though with modest 0.1% rises in 1-year and 5-year inflation expectations nL1N3271FP.

With Treasury trading closed for the Veteran's Day holiday, futures provided guidance on rates, initially rising 8bp in H2 2023 before the sentiment report led traders to cut that in half, keeping downward pressure on the dollar.

China's decision to ease some COVID restrictions nB9N30Y050, even as cases surged nL4N3270KR, undermined the dollar's safe-haven allure and supported the euro and yen due to the euro zone and Japan's heavy trade links with China.

Euro and sterling may also be getting help from falling natural gas prices, with their benchmarks off about 12-13% on Friday in the wake of Russia's withdrawal from Kherson nL1N3271VK.

USD/JPY fell 1.6% after breaking key supports, though further loss in NorAm trading were gradual.
A bigger breakdown looks technically probable once nearby Fibo and cloud support give way, perhaps if U.S. PPI and retail sales on Tuesday and Wednesday are bearish nL1N32715B.

Sterling rose 1%, using the 100-day moving average line it finally broke above on Thursday as support as it neared Aug.
26's 1.1900 high, having rebounded 14.5% from September's record low.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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