Dear Clients,
Below is this week’s market forecast from our trade desk.
USD/CAD – Pushing higher into 1.34800, as USOil falls another 4% at market open. Hinting towards the further confluence of a 50BP rate hike at the December FOMC meeting. As we’ve stated before… If USOil holds at these levels ($88 p/b), the FED will find it difficult to ease on its Monetary policy tightening. Now an up-to-date analysis will put an easing on MP tightening into closer view, as USOil sits at $74 p/b. Will be monitoring CAD releases this week to determine whether current USD/CAD longs are over-extended. Targets remain 1.35400.
EUR/USD – Despite the looming eurozone recession, ECB hawks suggest it may be premature to scale back rate increases. Currently, the market prices 61bp of hikes on 15 December (we expect 50bp). Clearly, that debate will continue. However, it still looks as if the USD storyline continues to dominate. We anticipate a move higher into 1.0500 is likely.
GBP/AUD – The GBP could remain an attractive stagflation and risk aversion hedge for now. Especially as recent speeches from the BOE have stayed pretty hawkish, despite a broadening consensus of a recession. We think this has played a major role in this GBP recovery, as well as an improved global risk sentiment, keeping optimism off the back of equity performance. However, we are currently monitoring GBP/AUD at the 1.80500 regions. It’ll be interesting to see how GA reacts off the October highs, off the back of renewed strength in the Australian economy. An issue that could keep the downward pressure on the AUD into the year-end is China’s weak growth. If a soft economic landing and a recovery in China’s growth could see an improvement in AUD optimism versus the GBP and USD.
We wish you a safe trading week in and out of the market.