Synopsis:

BNPP expects the Swiss Franc (CHF) to weaken further, with EUR/CHF projected to rise to 0.95 in Q1 2025, driven by a combination of monetary policy dynamics and market fundamentals.

Key Points:

1. Expensive Valuation and Rate Differentials:

   • CHF remains overvalued, and rate differentials are likely to weigh on the currency.
   • The Swiss National Bank (SNB) is unlikely to tolerate significant CHF strength, especially with negative imported inflation, which could prompt intervention as rates approach the zero lower bound.

2. Limited SNB Intervention (So Far):

   • Recent months suggest the SNB has not actively intervened in FX markets, but risks of intervention will increase if CHF strengthens further.

3. Factors Supporting CHF:

   • Switzerland’s wide current account surplus and the CHF's purchasing power parity (PPP) could provide a floor and limit EUR/CHF upside.

4. Geopolitical and Fiscal Drivers:

   • For EUR/CHF to rise significantly beyond 0.95, BNPP suggests either reduced geopolitical risks or a European fiscal policy response to address the region's growth challenges.

Conclusion:

BNPP anticipates a gradual weakening of CHF but highlights its structural support from Switzerland's external balance. EUR/CHF is forecasted at 0.95 for Q1 2025, with further gains hinging on improved risk sentiment or a more robust European fiscal response

• AUD/USD opens 0.2% higher as Trump comments spark guarded optimism

• Trump tells Davos he will demand lower interest rates, oil prices

• Trump says he expects Fed to listen to him on interest rates

• USD slips broadly on Trump's comments as US inflation fears subside a bit

• Trump's more moderate tone on tariffs, views on oil, rates lift risk & AUD

• AUD/JPY key as BOJ rate decision looms Fri with rate hike expected

• Australian markets closed Monday; Thursday range 0.62555-0.62995

• Resistance 0.6300-05, 0.6325, 0.6340-45, support 0.6250-55, 0.6230
AUD

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

Jan 23 (Reuters) - The dollar index slipped on Thursday and U.S. shares rose after President Donald Trump, via videoconference to business leaders at the World Economic Forum, called for lower oil prices and interest rates. Trump also said he would ask Saudi Arabia to help boost a planned U.S. investment package by $400 billion. EUR/USD tracked share prices higher after dipping briefly following Trump’s criticism of the European Union’s trade policy. Trump threatened tariffs on products not made in the United States. European Commission Executive Vice President Valdis Dombrovskis said the common area is open to discussing purchases of energy and arms from the United States to ward off tariffs. Euro gains slowed before reaching its 55-DMA of 1.0450 with the European Central Bank expected to lower policy rates when it convenes next week. Trump also said he wanted to meet Russian President Vladimir Putin soon to secure an end to the almost three-year-old war with Ukraine. Cable rose 0.3% and remains near the top of its post-inauguration range of 1.2160-1.2376. Gilt yield were steady before January PMI data on Friday. British finance minister Rachel Reeves told Reuters that she will announce changes if necessary in March to meet her fiscal rules. The yen edged higher ahead of Japan December CPI -- core forecast at 3.0% year-on-year -- and a highly-anticipated Bank of Japan rate hike on Friday. Focus is on policy guidance by Governor Kazuo Ueda's at the post-meeting briefing.

Treasury yields rose 0 to 7 basis points as the curve steepened. The 2s-10s curve was up about 5 basis points to +35.8bp.

The S&P 500 rose 0.22% on gains in healthcare and industrials.

Oil fell 1.1% following Trump comments about lowering prices.

Gold was little changed and copper rose 0.66% as the dollar eased.

Heading toward the close: EUR/USD +0.17%, USD/JPY -0.35%, GBP/USD +0.28%, AUD/USD +0.24%, DXY -0.11%, EUR/JPY -0.21%, GBP/JPY -0.02%, AUD/JPY -0.15%.(Editing by Burton Frierson Reporting by Robert Fullem)

Synopsis:

ANZ anticipates no changes to the federal funds rate at the upcoming January 26-27 FOMC meeting. The focus will likely shift to whether the March meeting is considered "live" or signals an extended pause in rate adjustments.

Key Points:

1. Pause in Rate Cuts:

   • The Fed has already implemented 100bps of rate cuts since September 2024.
   • Strong economic momentum, robust employment growth, and moderating inflation reduce the urgency for further rate cuts.

2. Economic and Policy Context:

   • The US economy has started 2025 with strength, and annual inflation declines have slowed, justifying a cautious approach.
   • Upcoming fiscal and trade policies, including potential tax cuts, tariffs, energy shifts, and deregulation, introduce uncertainty around growth and inflation.

3. Guidance for March:

   • The FOMC may indicate whether March is a "live" meeting for potential adjustments or if an extended pause is more likely.

Conclusion:

ANZ expects the Fed to hold rates steady at the January meeting, citing improved economic fundamentals and policy uncertainties. The Fed’s cautious stance will likely persist, with markets looking for clues on whether March could signal further policy shifts.

• NY opened near 0.6265, pair then near 0.6280 but sellers emerged

• US yield gains rallied the US$ soured risk sentiment

• 0.62555 traded just ahead of President Trump speaking to the WEF

• Trump said he would demand interest rates drop immediately

• Yields & US$ fell; USD/CNH fell toward 7.280, traded down -0.01% late

• Stocks & gold turned positive which added weight on US$

• AUD/USD neared 0.6300, pair traded up +0.36% late in the session

• Techs lean bullish; RSIs rising & monthly, daily bull hammers in place

• Hold above the rising 10- & 21-DMAs reinforce bullish technicals

• Australia, EZ, US January PMIs are key data risks Friday
audusd

(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Synopsis:

Bank of America maintains a cautious stance on EUR against G10 currencies in the near term due to trade uncertainty, weakened risk sentiment, and relative monetary policy dynamics, particularly following strong US economic data. They see opportunities in EUR/JPY and EUR/CAD downside trades.

Key Points:

1. Drivers of EUR Caution:

   • Trade Uncertainty:

     • Worsened risk sentiment and uncertainty around global trade policies continue to weigh on EUR, particularly against "high-beta" G10 currencies.
     • While trade uncertainty has retraced from its November peak, lingering concerns remain a significant headwind for EUR.

   • Relative Monetary Policy:

     • The ECB’s pricing is viewed as bearish, especially in comparison to the Federal Reserve, which continues to display a more hawkish stance following the robust US December jobs report.

2. Positioning Risks:

   • USD Positioning:

     • Extended USD long positioning raises concerns for a potential pullback.
     • This dynamic adds a degree of caution to outright EUR/USD downside trades, leading BofA to favor cross-specific strategies.

   • Euro Area Sentiment:

     • BofA notes that Euro-area bearishness is becoming stretched, creating potential limits to further near-term EUR declines.

3. Preferred Trades:

   • EUR/JPY Downside:
     • Monetary policy divergence with a potentially hawkish BoJ provides room for EUR/JPY weakness.
   • EUR/CAD Downside:
     • The CAD's relative resilience and potential trade uncertainties favor EUR/CAD downside in the near term.

Conclusion:

While EUR sentiment remains weighed down by trade uncertainty and ECB policy divergence, extended USD positioning leads BofA to favor EUR/JPY and EUR/CAD downside over broad-based EUR weakness. These cross-trades offer tactical opportunities amidst stretched bearish positioning on the Eurozone.

GBP/USD has carved out a slightly higher range following the sterling-benign news flow since the inauguration of U.S. President Donald Trump, but it could remain capped until the administration provides clarity on trade and upcoming central bank meetings illuminate the path of global rates in 2025.

At 1.2330, cable remains near the top of its post-inauguration range of 1.2160-1.2376. Sterling is hindered by its falling 21-DMA at 1.2370 owing to diverging Fed-BoE policy expectations. LSEG's IRPR indicates near 70bp of BoE cuts in 2025 but only 39bp from the Fed. Short-term rate futures foresee U.S. rates landing at 4.11% by December and UK borrowing costs at 4.06%. Rates alone would dictate dollar outperformance versus sterling in 2025, but the global economic impact of any prospective U.S. tariffs may affect UK trade and growth, even if Britain avoids being directly targeted. With the Fed expected to hold steady on Jan. 29, traders will focus on guidance for clues at the depth and speed of future rate moves. The BOJ meets on Friday, the ECB and BOC at the end of the month and BoE on Feb. 6.

For now, the pound is likely to fare better versus the Canadian dollar and euro as the BoC and ECB are expected keep rates well below the BoE.
GBP Chart:

(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Synopsis:

Morgan Stanley reiterates its forecast that the Bank of Japan (BoJ) will raise its policy rate from 0.25% to 0.50% at its January Monetary Policy Meeting. The decision appears highly probable barring any significant market volatility after the US presidential inauguration.

Key Points:

1. Rate Hike Expectation:

   • A 25bps rate hike is considered almost a "done deal" for the January MPM.
   • This move reflects the BoJ's growing confidence in Japan’s economic and inflation trajectory.

2. Post-MPM Guidance:

   • Governor Kazuo Ueda is expected to adopt a balanced tone during the post-meeting press conference, aiming to manage market expectations regarding the pace of future policy adjustments.

3. Conditions for Decision:

   • The absence of significant global financial market disruptions, particularly following the US presidential inauguration, is seen as a prerequisite for the policy change.

Conclusion:

Morgan Stanley maintains its view that the BoJ will initiate its long-anticipated rate hike at the January meeting, bringing the policy rate to 0.50%. Governor Ueda is likely to signal a cautious and gradual approach to further tightening to ensure policy adjustments do not destabilize markets.

Synopsis:

Credit Agricole anticipates that the Reserve Bank of Australia (RBA) will deliver a hawkish 25bps rate cut at its February meeting, contingent on next week’s inflation data. While lower inflation metrics may prompt easing, structural inflationary pressures and global uncertainties suggest a cautious policy approach.

Key Points:

1. Inflation Data as a Trigger:

   • Trimmed mean inflation readings of 0.5% QoQ and 3.3% YoY would surprise the RBA, bringing core inflation to 2.6% annualized, squarely within the 2-3% target band.
   • Trimmed mean figures of 0.4% QoQ and 3.2% YoY would likely solidify the case for a February rate cut.

2. Rationale for a Hawkish Cut:

   • Sticky inflation drivers: Solid wage growth coupled with low productivity and elevated rental inflation are expected to sustain underlying price pressures.
   • Policy considerations: Fiscal expansion during an election year and external price pressures from Trump's tariffs add complexity to the RBA’s decision-making process.

3. Market and Policy Implications:

   • The RBA's current cash rate of 4.35% is seen as only modestly restrictive. A small rate cut would provide flexibility without significantly undermining inflation management.
   • RBA Governor Michele Bullock is expected to emphasize that the easing cycle will be shallow and cautious, managing household expectations amidst mixed labor market indicators and international uncertainties.

Conclusion:

A hawkish cut by the RBA in February appears increasingly likely, as inflation data could provide the final nudge. The RBA is expected to carefully navigate domestic and international headwinds, reinforcing the message of a modest and data-driven easing cycle.

• German and EZ PMI data is due on Friday, potentially market moving

• Overnight options expire 10-am New York/14GMT Fri and now include the data

• However, additional volatility risk premium limited - expected tame reaction

• Overnight expiry EUR/USD implied volatility opened 13.0 Thurs from 12.0 Mon

• Premium/break-even 52 USD pips to 56 USD pips - negligible and already lower

• EUR/JPY vol may offer better value as it also includes Friday's BoJ decision

• Big option expiries and related hedging may have more effect on EUR/USD

• 3.3 billion euros of 1.0400-05 strikes expire at 10am New York Thursday

• Friday has massive 7 billion euros between 1.0350-1.0400 to underpin/contain
EUR/USD option strike expiries Jan. 23 and 24


Overnight expiry EUR/USD implied volatility

(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Minor EUR/USD correction to 1.0457 follows 1.1214-1.0177 drop

• Rebound fails close to the 2023 low at 1.0448 - base of two year range

• Rally became stretched toward peak 20-day Bollingers and 55-DMA

• Short covering lessens prior restraint of spec bets

• Traders often reestablish bets that have rewarded them

• Resumption of downtrend targets 1.0061 next, then 0.9939

• Oil the unknown quantity that's key for currencies

• *



EURUSD


EURUSD

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Large 0.6260 option expiry exerts magnetism over AUD/USD before Trump speaks

• Trump to remotely address business, political leaders in Davos at 1600 GMT

• Offers pre-0.63 capped AUD/USD at its highest level since Jan 6 on Wednesday

• 0.6131 was 57-month low last week (Jan 13), after USD rose on NFP beat

• U.S. weekly jobless claims data due at 1330 GMT; 220k forecast vs 217k prior

• Fed rate hold expected next week (Jan 29). RBA rate cut likely on Feb 18

AUDUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

Jan 23 (Reuters) - Overnight expiry FX options now include Friday's Bank of Japan policy decision and their premium/break-evens can offer clues about the perceived extent of the subsequent USD/JPY reaction.

Volatility is an unknown yet key part of an FX premium, so dealers use implied volatility as a substitute. Since its expiry included the BoJ decision, overnight USD/JPY implied volatility has jumped from 11.5 to 19.25. That shows the additional FX realised volatility that dealers fear the BoJ decision could create.

In terms of premium/break-even, the increased volatility has taken it from 75 JPY pips to 125 JPY pips. For a simple vanilla straddle, that is the amount of JPY pips which holders must capture, in either direction, to cover the premium.

For context, overnight expiry USD/JPY implied volatility was 26.0 or 170 JPY pips for the last BoJ meeting on Dec. 19 and current levels are the lowest for any BoJ meeting since June 2024.

Interest rate futures are nearly fully pricing in a 25bps rate hike from the BoJ on Friday, suggesting JPY gains could be modest if the hike proceeds without unexpected hawkish rhetoric. The greatest volatility risk for USD/JPY lies to the upside if the BoJ decides not to hike.

FX Options wrap - Big profits, investor relief, tariff reactions
Overnight expiry USD/JPY FXO implied volatility

(Richard Pace is a Reuters market analyst. The views expressed are his own; Editing by Alison Williams)

• EUR/USD failed to sustain last week's break under the 1.0196 Fibo

• 1.0196 Fibo is a 61.8% retrace of the 0.9528 to 1.1276 EBS rise

• That looks like a "bear trap" has formed and that is usually bullish

• A bear trap is set when a market breaks below a tech level but then reverses

• There is scope for bigger gains above the 1.0500 level

• Bears really need a weekly close under the 1.0196 Fibo

• That would pave the way for a drop to parity. EUR/USD Trader

Weekly Chart:

(Martin Miller is a Reuters market analyst. The views expressed are his own)

• Cable hugs 1.2300 option expiry after drop from 1.2376 (two-week high Weds)

• Decline influenced by modest rise in UST yields on Wednesday

• GBP/USD was sub-1.22 before USD fell on no day-one tariffs guidance Monday

• Trump to remotely address business, political leaders in Davos at 1600 GMT

• Putin growing concerned by economy, as Trump pushes for Ukraine conflict end

• Safe-haven USD may dip if war ends, having risen when it began in Feb 2022

GBPUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

• EUR/GBP attempting to drive home another bullish advantage

• The 10-day MA has crossed above the 200MA, bull signal

• Still a risk of sideways action below the 0.8473 Jan. 20 five-month high

• On any corrective pullback a minimum adjustment level is at 0.8414

• The 10 and 200-DMAs just ahead at 0.8428 and 0.8422, respectively

• We lean bullish and will monitor price on dips

• EUR/GBP Trader EUR/GBP Trader: [page:2343]
EUR/GBP daily candle chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own.)

• 0.1% lower near the base of a tight 1.0398-1.0416 range - low-key in Asia

• Trump threatens Russia, others with tariffs if a Ukraine deal is not reached

• A workable Ukraine/Russia deal would be a major positive for Europe/Euro

• Charts - positive daily momentum studies, horizontal 21-day Bollinger bands

• 5, 10 & 21-DMAs edge base/rise, weekly moving averages fall - no strong bias

• 1.0450 55-DMA, 1.0457 2025 top, 1.0467 upper 21-day Bolli first resistance

• 1.0343 21-day moving average and Monday's 1.0266 low are initial supports

• 1.0450/67 M/A, 2025 high and upper 21-day Bollinger band will be resilient

• 1.0400 2.599 BLN and 1.0450 767 mln - close Jan 23rd strikes
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• Off 0.15% in a 1.2302-1.2322 range - flurries of interest on FX Matching

• Low-key in Asia, as Trump concentrated on domestic issues - USD up 0.05%

• UK to tackle infrastructure 'blockers' by cutting legal challenge options

• Growth underpins policy - efficient planning rules key for implementation

• There is no tier-one UK data - risk appetite, USD, and Trump policies lead

• Charts - daily momentum studies rise, 21-day Bollinger bands edge lower

• 5, 10 & 21-DMAs conflict - weeklies remain bearish - negative setup remains

• Monday's 1.2160 low, then the 1.2100 2025 base are initial major supports

• A close above the 1.2368 21-DMA, which capped Wednesday, would be positive

• Close above 1.2370 would target 1.2575/1.2616 range top in early 2025
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• Like other JPY crosses, AUD/JPY spurted higher o/n, 97.38 to 98.33

• Upside capped again in area of descending 55-DMA today at 98.24

• Asia so far today 97.98-98.24, on hold below yesterday's high

• Tokyo seeing some budding carry interest but better returns from USD, GBP

• Support from hourly Ichimoku kijun line at 97.87, 55-HMA 97.54 below

• Base of daily Ichimoku cloud also a support, cloud 97.83-98.94

• Option expiries today 95.55-60 A$515 mln, 99.80 A$520 mln, 99.95 A$928 mln

• Also A$519 mln way up at 103.25 strike

• Related comment , also , for more click on [FXBUZ]

AUD/JPY daily:


AUD/JPY hourly:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• Steady - little news for Asia as Trump concentrates on US immigration

• Trump's EV rollback not expected to suppress appetite for critical minerals

• Low-key stock and commodities in Asia, as Lunar New Year preparations begin

• No tier-one data in Asia or Europe today, tight range likely as Trump sleeps

• Techs - 5, 10 & 21 DMAs edge higher as 21-day Bollinger bands expand

• Daily momentum studies climb - a positive setup on the daily charts

• 0.6285 upper 21-day Bollinger band and 0.6302 2025 top resilient resistance

• Tuesday's 0.6208 low and then the 2025 0.6131 base are initial support

• Sustained break above the 0.6302 2025 high would be a strong positive signal
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• Off 0.1% after closing down 0.35%, with the USD up just 0.1%

• Record bids for 15-year gilt despite debt selloff - confidence returns?

• There is no tier-one UK data - Risk appetite, USD, and Trump policies lead

• Charts - daily momentum studies rise, 21-day Bollinger bands edge lower

• 5, 10 & 21-DMAs conflict - weeklies remain bearish - negative setup remains

• Monday's 1.2160 low, then the 1.2100 2025 base are initial supports

• A close above the 1.2369 21-DMA, which capped Wednesday, would be positive

• Close above 1.2370 to target 1.2575/1.2616 range top in early 2025
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• -0.05% after closing little changed on Wednesday with the USD up just 0.1%

• There is no significant Australian data, so risk appetite and the USD lead

• Trump initiates policy on all fronts, so his comments may spark volatility

• Techs - 5, 10 & 21 DMAs edge higher as 21-day Bollinger bands expand

• Daily momentum studies climb - a positive setup on the daily charts

• 0.6284 upper 21-day Bollinger band and 0.6302 2025 top resilient resistance

• Friday's 0.6164 low and then the 2025 0.6131 base are initial support

• Sustained break above the 0.6302 2025 high would be a strong positive signal
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

Synopsis:

Following softer-than-expected Q4 inflation data, ING anticipates the Reserve Bank of New Zealand (RBNZ) will deliver easing a 50bps rate cut at its February meeting. While near-term NZD/USD support is possible, structural challenges and global USD strength could limit gains.

Key Points:

1. NZ Inflation Data:

   • Headline CPI held steady at 2.2%, slightly above market expectations of 2.1%.
   • Non-tradable inflation fell faster than expected, down to 4.5% from 4.9%, below RBNZ’s November forecast.
   • This marks the lowest non-tradable inflation since late 2021, signaling reduced domestic price pressures.

2. RBNZ Policy Outlook:

   • A 50bps rate cut is expected at the 19 February meeting, with markets fully pricing in this move.
   • ING anticipates two additional 25bps cuts, bringing the policy rate to 3.25%, as the RBNZ aligns with global central banks prioritizing growth stabilization.

3. NZD/USD Implications:

   • Short-term support: NZD/USD may hold above the 0.570 mark due to technical factors and reduced tariff-related fears.
   • Positioning dynamics: NZD remains the largest G10 short, as per CFTC data, which could limit immediate downside.
   • Longer-term challenges: Broader USD strength, coupled with New Zealand’s easing trajectory, poses risks for sustained NZD/USD rallies.

Conclusion:

The softer inflation print paves the way for a significant frontloaded RBNZ easing cycle, beginning with a 50bps cut in February. While NZD/USD might find temporary support from positioning and reduced tariff concerns, ING maintains a cautious outlook, with structural factors likely weighing on the pair in the medium term.

• USD/JPY touched a one-week high as Trsy yields firm, S&P hits record

• Pair looks to settle near top of 155.36-156.71 day's range on EBS

• Improving risk sentiment, sliding vols sends JPY crosses higher

• USD/JPY 1-year vol of ~9.5%, lowest level since early Sept

• Resistance at 21-DMA of 157.12 ahead of key 158 price congestion

• Support seen at 155.35 lower Bollinger ahead of 154.80-155.00 zone

• Turning slow stochastics hint at further swing gains

• Japan Dec. trade data, weekly MOF flows to be eyed ahead of BOJ Friday
Yen

(Robert Fullem is a Reuters market analyst. The views expressed are his own.)