• $IDX +0.01 in Dec 4-10 IMM period, Spec net USD G10 position +1$1.50bn

• Trump-trade USD bid gives way to less-dovish Fed in 2025-related bid

• EUR$ +0.2% in period; specs -8.1k contracts now -75.6k on dovish ECB view

• $JPY +1.58%, specs +23.4k contracts now +25.8k on less-dovish BoJ view

• GBP$ +0.67%, specs +7.8k contracts now +23.4k; GBP 150 pip slide since Tues

• $CAD +0.79%, spec -22.2k now -181.5k diverging U.S.-CA yields sink CAD

• AUD$ -1.65%, specs -12.9k contracts now +8.5k; dovish RBA hold saps AUD strength

The dollar index edged up on Friday and was on pace for its best week in a month amid broadly higher Treasury yields ahead of next week’s Federal Reserve policy meeting, while sterling slid after an unexpected contraction in UK economic activity.

The U.S. central bank is expected to lower policy rates on Wednesday and possibly signal a pause in easing in the New Year amid a buoyant economy.

The euro posted a modest gain amid short-covering and firmer bund yields though large expiries helped contain prices.

Four European Central Bank policymakers backed further interest rate cuts provided that inflation settles at the ECB's 2% goal as expected.

The yen slid against its G10 peers as yields and oil prices advanced.

The yuan was marginally weaker after reports that new bank lending in China rose by far less than expected in November.

Treasury yields were up 5 to 7 basis points.
The 2s-10s curve was up about 2 basis points to +15.6bp.

The S&P 500 eased 0.09% amid weakness in materials.

Oil rose 1.8% on expectations that additional sanctions on Russia and Iran could tighten supplies.

Gold pared a weekly gain, falling 0.99% amid higher yields and a stronger dollar.

Copper slid 1.13% due to dollar gains and broadly lower metal prices.

Heading toward the close: EUR/USD +0.30%, USD/JPY +0.67%, GBP/USD -0.36%, AUD/USD -0.20%, DXY +0.02%, EUR/JPY +0.99%, GBP/JPY +0.34%, AUD/JPY +0.56%.

For more click on FXBUZ

• GBP$ near session low in NY afternoon, -0.45% at 1.2614; Fri range 1.2678-08

• Below f/c Click here
  data weighed on pair, hints at dovish BoE in 2025

• Close sub-1.2643- the 50% Fib of 1.2475-1.2818 hints at further weakness

• Sterling in trouble as glum growth data signals a more dovish BoE

• BoE exp'd to hold rates Dec 19; traders await PMI, CPI, employment pre-MPC

• Diverging Fed, BoE rate views; dovish Fed tones abating saps GBP of vigor

• Supt 1.2603 61.8% of 1.2475-1.2818, 1.2569 Nov 27 low, 1.2475 low Nov 22

• Res 1.2637 falling 10-HMA, 1.2678 Dec 13 high, 1.2787 daily high Dec 12

Synopsis:

Goldman Sachs expects the Swiss National Bank (SNB) to deliver two additional 25bp rate cuts in H1 2025 after its unexpected 50bp cut this week, citing reduced inflation risks and potential economic headwinds.

Key Points:

• December Decision: The SNB cut its policy rate by 50bp to 0.5%, exceeding consensus expectations for a 25bp reduction.
• Inflation Outlook: The SNB revised its inflation projection down, expecting inflation at 0.7% by Q3 2027 due to lower-than-expected oil and food prices.
• Policy Guidance: Despite removing its explicit easing bias, the SNB signaled concerns about inflation and FX developments, supporting further easing.
• Future Cuts Expected: Goldman Sachs maintains its forecast for two additional 25bp cuts in H1 2025, bringing the policy rate to 0%. This reflects expected economic challenges and continued franc appreciation pressure.

Conclusion:

Goldman Sachs sees the SNB’s recent policy action and guidance as consistent with further monetary easing in 2025, with a projected terminal rate of 0%.

• AUD/USD erased overnight gains & hit a fresh session low of 0.6352 in NY

• US$ buys & commodityHGv1, goldXAU=, stockESv1 weighed on AUD/USD

• AUD/USD drop lead to the emergence of a daily inverted hammer candle

• Fall after Thursday's gravestone doji, falling RSIs reinforce bear signs

• Hold below trend line off 2022 low, Aug. monthly low add to bear signals

• Dec. Global PMIs, Fed risks next week may determine if AUD/USD fall extends

• For more click on FXBUZ

Synopsis:

SocGen highlights how 2-year bond yields in the US, Germany, and Japan shape FX trends, emphasizing the need to track future yield moves. While the dollar’s uptrend has historically followed rising US yields, uncertainty around ECB and BoJ policies clouds the EUR and JPY outlooks.

Key Points:

• USD Strength Linked to Yields: The dollar’s historical rallies were driven by rising US 2-year yields, notably from 0.1% in 2011 to 3% in 2018, and again toward 5% in 2021-22.
• EUR/USD Dependency on Schatz Yields: Previous EUR/USD rebounds coincided with rising German Schatz yields, though these moves proved temporary amid broader economic challenges.
• BoJ Uncertainty: The BoJ’s indecision on rate hikes has frustrated expectations for a sustained JPY recovery, leaving USD/JPY sensitive to any policy shifts.
• Current Outlook: Despite recent corrections, US yields remain elevated, supporting USD strength. The euro and yen require decisive policy action from the ECB and BoJ to reverse their downtrends.

Conclusion:

SocGen sees US bond yields keeping the dollar supported, while EUR and JPY recovery prospects depend on meaningful yield increases from the ECB and BoJ, which remain uncertain for now.

• Cable meets headwind at 1.2668 after pushing recovery envelope from 1.2619

• 1.2619 was Ldn am low, after negative UK Oct GDP. 1.2668 was Thursday's low

• More offers expected near 1.27 (stops below 1.2700 were tripped on Thursday)

• UK public predicts more inflation. BoE rate hold expected next week (Dec 19)

• UK Dec flash PMIs due on Monday at 0930 GMT: services f/c 51.0; mfg f/c 48.2

• Will Farage be Britain's next PM? (next general election expected in 2029)

Synopsis:

BofA highlights rising market focus on the upcoming BoJ policy decision, noting potential sensitivity to the JPY exchange rate despite reports suggesting no urgency for a December hike. While structurally bearish on the JPY, BofA sees limited room for near-term depreciation.

Key Points:

• BoJ Policy Focus: Market attention shifts toward the BoJ's December meeting amid speculation on a possible rate hike or delay until January.
• Exchange Rate Sensitivity: Reports indicate the BoJ may be more sensitive to JPY levels, influencing its decision-making process.
• JPY Performance: The JPY was the weakest-performing currency this week, driven by positioning rather than fundamental shifts.
• Terminal Rate Pricing: Despite market noise, BoJ terminal rate expectations have remained stable.

Conclusion:

BofA maintains a structurally bearish view on the JPY but sees limited downside in the near term due to market sensitivity around BoJ policy and exchange rate dynamics.

Synopsis:

ANZ expects the USD to remain strong due to robust inflation and economic surprises but sees marginal risks from weakening US labor market signals. For the GBP, BoE policy and weakening UK PMIs may weigh on sentiment, though a year-end bounce toward 1.28 remains possible.

Key Points:

USD Outlook:

• US inflation and economic surprises remain positive, supporting USD strength.
• Weak US household survey data hint at potential labor market softening.
• The DXY may push higher into year-end before moderating toward 105.
• H1 2025 USD strength expected amid poor global growth and pro-USD US policies.

GBP Outlook:

• Heavy UK data week focuses on BoE’s easing cycle, with inflation and wage data critical.
• UK PMIs have deteriorated, suggesting economic headwinds.
• CFTC data shows reduced long GBP/USD positions, easing from October peaks.
• Mildly negative to neutral near-term outlook, with potential year-end upside toward 1.28.

Conclusion:

ANZ remains bullish on the USD into early 2025, citing strong US fundamentals despite emerging labor market concerns. The GBP faces near-term risks from BoE policy expectations and weakening PMIs, though a year-end recovery toward 1.28 is still possible.

• 1-month expiry AUD/USD implied volatility inside 9.0/10.0 since US election

• 1-month daily realised volatility at 7.85 makes implied appear expensive

• However, 1-month high frequency (hourly) volatility stays well above 9.0

• Shows that frequent delta hedging can capture more FX realised volatility

• 1-month risk reversal contract steady at 0.75 AUD puts over calls (downside)

• That suggests that implied volatility is also supported by AUD/USD losses

For more click on FXBUZ

• GBP/USD options are showing concerns about deeper GBP/USD declines

• There's been some interest to cover short positions sub 1.2500 for January

• Latest GBP/USD slide has underpinned downside over upside strike premiums

• 1-month risk reversals edge slightly higher to 0.5 GBP puts vs calls

• That comes after setback from 2024 high at 1.0 over U.S. election, to 0.4

• Risk reversal consistent with implied volatility gaining as GBP/USD falls

• Benchmark 1-month expiry implied volatility regains 6.8 from 6.6 mid week

For more click on FXBUZ

As the tenth anniversary of the "Frankenshock" approaches, might the Swiss National Bank consider reintroducing a minimum exchange rate for EUR/CHF at some point next year?

A new EUR/CHF floor would be one alternative to taking Swiss interest rates negative if the safe-haven franc remains strong and helps to keep Swiss inflation closer to zero than 2% in 2025.

Any such floor could be set as high as 1.00, probably no lower than 0.92, or somewhere in between.

Should the SNB reduce rates to zero as early as March, following Thursday's 50 basis point cut to 0.5%, it could increase the possibility of the central bank mulling whether to dust off the EUR/CHF minimum exchange rate option in its toolkit - if Swiss inflation/franc levels warrant further action.

The SNB introduced a 1.20 floor for EUR/CHF in Sept.
2011, which remained in place until it was unexpectedly scrapped on Jan.
15, 2015.

Related comment: nL1N3ND09N

For more click on FXBUZ

• Sell-off stretched toward 1.0429 base of 20-day Bollingers

• The 2024 low at 1.0332 is well below base Bollinger bands

• Pace of decline may slow or pair may bounce

• Shrinking German surplus spells trouble for the euro nL1N3NE070

• The dollar could rise between 5% and 9% nL1N3ND07Y

The cash hedging of soon-to-expire FX option strikes may bolster any nearby support and resistance levels, while potentially having a magnetic effect on FX price action towards each day's 10-a.m.
New York cut expiry.

Friday sees the biggest EUR/USD strike expiries of 2024, but they are eclipsed by those due at the end of next week.

The largest EUR/USD strikes expiring on Monday are at 1.0400-1.0410 on 1.8 billion euros, 1.0500 on 3 billion euros, 1.0550 on 2.1 billion euros and 1.0600 on 8 billion euros.

Tuesday's strikes are at 1.0400 on 1 billion euros and 1.0525 on 1.6 billion euros; Wednesday's at 1.0500 on 1.2 billion euros; and Thursday's at 1.0400 on 1.8 billion euros, 1.0550-55 on 1.9 billion euros 1.0600 on 2.3 billion euros.

Friday holds the bulk of next week's FX option strike expiries.
There are 1.0325 strikes on 3.8 billion euros, 1.0350 strikes on 3.2 billion euros.
1.0400 on 4.2 billion euros, 1.0425-30 on 4 billion euros, 1.0440 on 2.1 billion euros, 1.0450 on 5.4 billion euros, 1.0500 on 8.2 billion euros, 1.0525 on 5.6 billion euros, 1.0550-55 on 4.5 billion euros, 1.0570-80 on 3 billion euros and 1.0600 on 6 billion euros.

For more click on FXBUZ

• New high for the year, 1.4243, and the bid is holding

• Daily RSI and slow stochs are overbought but positive momentum has room

• The 10-day moving average beginning to define the latest price rise

• Resistance points are thinning out with April 2020 levels in play

• Weekly action set for a strong close but studies are massively overbought

• Tempted to sell but will wait for daily reversal/correction signals

• USD/CAD Trading Page TGM2345

  For more click on FXBUZ

Repeats with no changes

• FX Option strikes expire at 10-am New York/15.00 GMT - Friday December 13

• EUR/USD: 1.0375 (2.6BLN), 1.0400 (5.2BLN), 1.0420-25 (1.9BLN)

• 1.0450-60 (2.7BLN), 1.0470-75 (1.5BLN), 1.0500 (7.6BLN), 1.0520-25 (1.8BLN)

• 1.0535 (1BLN), 1.0550 (2.7BLN), 1.0570-80 (1BLN), 1.0600 (4.8BLN)

• USD/CHF: 0.8900 (403M), 0.9000 (600M)

• EUR/GBP 0.8185 (693M)

• AUD/USD: 0.6350 (211M), 0.6375 (200M), 0.6390 (200M)

• USD/CAD: 1.4225 (1BLN), 1.4275-85 (1.7BLN)

• USD/JPY: 152.60 (774M), 153.00 (402M), 153.50 (370M), 154.00 (1BLN)

• AUD/JPY: 96.50 (592M), 99.40 (697M)

• FX options wrap - ECB and SNB done, Fed, BoJ and BoE up next nL1N3ND0NA

For more click on FXBUZ

• USD/JPY grinds higher above 21 DMA 152.34, last 152.91

• Adds to this week's bullish crossover above 200 DMA 152.07

• Near-term target 154.18 entrance of Bollinger uptrend channel

• Rising Ichimoku cloud support at 151.67 reinforces downside

• Slim majority of economists see BOJ hold next week nL4N3NB0GY

• Central bank has indicated no rush to hike nL4N3NC1OT

• For more click on FXBUZ

Synopsis:

Danske maintains a long GBP/USD position into year-end, driven by expectations of USD weakness amid a softening US growth outlook and bearish seasonal factors.

Key Points:

• US economic surprise index is positive but trending lower.
• Stretched net long USD positioning adds to downside risks.
• Bearish seasonal factors reinforce expectations of USD depreciation.
• Long GBP/USD position maintained from last week.

Conclusion:

Danske expects USD weakness to persist into year-end due to a deteriorating US growth outlook and stretched USD positioning, supporting their long GBP/USD trade.

• Off 0.05% at the base of a busy 1.2663-1.2678 range on FX Matching

• UK consumer confidence touched 4-month high in December, GfK survey shows

• British consumers appear to be more optimistic than business post-budget

• Busy UK data schedule today led by GDP - see the chart for RTRS polls

• Charts - daily momentum studies crest/fall, 21-day Bollinger bands flat line

• 5, 10 & 21-DMAs ease - a modest negative daily bias, weeklies head lower

• The bearish outside day on Thursday needs a close below 1.2667 to confirm

• Last week's 1.2619 low, then the 1.2475 November trend low initial supports

• Dec 6 1.2810 recovery top then 1.2839, 0.382% Sep/Nov fall resistance

For more click on FXBUZ

• USD/JPY up 0.1% in Asia, pares gains after rising to a 2-week high of 152.96

• Elevated U.S. yields underpin;10-year hovers near highest level since Nov 25

• Dollar supported on expectations Fed will cut rates next week, then pause

• Trimming back of bets for a BOJ rate hike next week weigh on JPY

• Japan business mood improves slightly; tad positive for rate hike bets

• Support 151.90-152.00, 151.50, resistance 153.00, 153.20-25, 153.66

• Asia range 152.47-152.96

• For more click on FXBUZ

Capitalizes USD/JPY

• USD/JPY unchanged in Asia, to remain bid on dips as higher US yields support

• Sticky US inflation, expectations of hawkish Fed cut next week underpin

• BOJ tankan taken in stride: JP firms expect CPI to rise 2.4% a year from now

• Their projection unchanged from 3 months ago; 3 year CPI projection same

• Report BOJ leaning toward keeping rates steady next week undermines JPY

• Support 151.90-152.00, 151.50, resistance 152.80-85, 153.20

• Asia range : 152.47-152.75

• For more click on FXBUZ

• Steady after closing off 0.65% with the USD up 0.4%, EUR/GBP +0.35%

• GBP weak on profit taking into today's busy UK GDP-led data schedule

• Expecting a quiet sterling session in Asia ahead of upcoming data

• Techs - daily momentum studies crest, horizontal 21-day Bollinger bands

• 5, 10 & 21-DMAs ease - a modest negative bias, weeklies head lower

• A bearish outside day on Thursday needs a close below 1.2716 to confirm

• Last week's 1.2619 low, then the 1.2475 November trend low initial supports

• Dec 6 1.2810 recovery top then 1.2839, 0.382% Sep/Nov fall resistance

  For more click on FXBUZ

• USD/JPY likely to stay supported on dips after closing 0.1% higher Thursday

• Sticky U.S. inflation boosts USD across the board

• Higher U.S. yields, expectations of hawkish Fed rate cut next Wed support

• Report BOJ leaning toward keeping rates steady next week undermines JPY

• Japan Tankan key for direction Friday, may influence BOJ rate expectations

• Support 151.80-90, 151.50, resistance 152.70-80, 153.20

• Thursday range 151.81-152.76

• For more click on FXBUZ

Synopsis:

ANZ expects AUD/USD to face near-term headwinds due to tariff risks and concerns over China but anticipates a recovery toward 0.67 by the end of 2025, supported by resilient domestic fundamentals and limited RBA easing.

Key Points:

• AUD/USD has dropped from 0.69 in September to below 0.64 in December.
• No RBA rate cut expected in Q1 2025, with easing likely starting in May.
• RBA expected to deliver two rate cuts in 2025, ending at a 3.85% terminal rate.
• Tariff-related risks and China concerns could trigger intraday moves toward 0.60.
• Australia’s economic resilience, driven by population growth and potential fiscal easing, supports a recovery in the AUD.

Conclusion:

ANZ sees downside risks for AUD/USD in H1 2025 due to potential trade policy shocks but expects stabilization and recovery toward 0.67 by year-end as macro fundamentals come into play.