Newsquawk

US Market Open: DXY recovers amid a PBoC RRR cut in otherwise holiday-sapped trade

25 Nov 2022, 11:10 by Newsquawk Desk

European bourses and US futures are near the unchanged mark with newsflow limited in holiday-sapped trade
DXY has experienced a resurgence to 106+ parameters, aided by the PBoC cutting the RRR as touted
Core fixed is under pressure with Bund’s below yesterday’s trough though holding onto the 141.00 mark; USTs in-fitting directionally
Crude benchmarks have been grinding higher despite the USD pickup and further China COVID controls, oil price cap talks set to resume later
Looking ahead highlights include ECB’s de Guindos
Note, the desk will operate a normal service until 18:15GMT/13:15EST, upon which the desk will close.
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Click here for the newsquawk European FX Wrap, which recaps the main newsflow and FX-related moves.
In brief, price action was very contained and rangebound with newsflow thin and primarily focused on the gas/oil price cap, German Ifo and Central Bank speak.
German Ifo Business Climate New (Nov) 86.3 vs. Exp. 85.0 (Prev. 84.3, Rev. 84.5)
Turkish CBRT Weekly Repo Rate (Nov) 9.00% vs. Exp. 9.00% (Prev. 10.50%); decided to end the rate cut cycle that commenced in August.
ECB Minutes (Oct): 75bp supported by a "very large majority", a few members expressed a preference for 50bp - click here for full details.
ECB's Schnabel said they stand ready to counter fragmentation in markets that is not justified. Incoming data thus far suggests that slowing down the pace of rate adjustments remains limited.

European bourses are little changed but experienced a very modest negative bias initially, Euro Stoxx 50 Unch., in limited holiday-sapped trade.
Sectors are mixed/negative with no overt bias.
Stateside, futures are similar to European peers in terms of both the direction and magnitude of trade thus far, ES +0.2
UK Black Friday volume of payment transactions have thus far been consistent with 2021, via Barclaycard Payments.
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DXY lifted to a 106.20 peak at best, with much of the action occurring prior to the PBoC RRR cut.
A cut which has applied further modest pressure to the Yuan, though it was already sensitive to the latest COVID controls/cases.
Antipodeans are towards the bottom of the pile despite domestic data in a paring of the week's RBNZ induced upside.
At the other end of the spectrum, the EUR is the incremental outperformer though has made little ground above Unch. and is currently pivoting 1.04
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Notable FX Expiries, NY Cut:

Core benchmarks have slipped throughout the morning, with Bunds moving below yesterday's trough though retain the 141.00 handle.
EGBs were seemingly unaffected by ECB's Lane who reaffirmed a meeting-by-meeting approach to policy.
USTs in-fitting directionally but with magnitudes less pronounced given the shortened session for Thanksgiving.
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WTI and Brent Jan’23 have exhibited grinding upside throughout the European morning, upside that has occurred despite a modest revival in the DXY’s fortunes to back above 106.00 and further China COVID woes.
Saudi and Iraqi Energy Ministers stressed the importance of working within the OPEC+ framework and reiterated further measures to ensure stability of the oil market if necessary, according to a statement.
EU talks on the oil price cap look like they will resume later today, via WSJ's Norman.
German Energy Regulator says he will consider gas storage levels to be critical if they are sub-40% on February 1st, currently all indicators are stable re. gas supply.
Spot gold and silver have succumbed to the mentioned USD upside, with the yellow metal probing USD 1750/oz to the downside while base metals are incrementally firmer given China stimulus.
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NOTABLE EUROPEAN HEADLINES

Spanish windfall tax on banks and large energy companies cleared the first hurdle, according to Reuters.
ECB's Lane says following a meeting-by-meeting approach to setting monetary policy will help ensure that our decisions are responsive to the evolving forward-looking assessments of the medium-term inflation outlook.
ECB insider says they see no realistic scenario where we reduce the balance sheet by much next year, via Econostream.

NOTABLE EUROPEAN DATA

German GDP Detailed QQ SA (Q3) 0.4% vs. Exp. 0.3% (Prev. 0.3%)
ONS identifies errors in PPI involving diesel, revises up annual output PPI rate by an average of 1.8pp between January-October 2022. October's YY PPI is now 17.2% vs 14.8% in the prev. estimate.

Kherson regional official alleged that Ukrainian authorities are forming purge brigades in the city of Kherson that will carry out purge campaigns among civilians, according to TASS.

UN Human Rights Council voted to establish an investigation on human rights abuses in Iran, according to The Guardian.

APAC stocks traded mixed with price action mostly rangebound amid the lack of any significant news catalysts to spur markets and the absence of a lead from Wall St due to the Thanksgiving holiday.
ASX 200 gained with the index lifted by strength in the consumer-related and defensive sectors but with upside limited by losses in the commodity-related industries.
Nikkei 225 was lacklustre amid pressure in bonds and as participants digested firmer-than-expected Tokyo inflation data in which Core CPI rose to its highest in four decades.
Hang Seng and Shanghai Comp were mixed with underperformance in Hong Kong after the government extended social distancing measures through to December 14th, while the mainland bourse was kept afloat despite the deteriorating COVID situation with sentiment helped by ongoing hopes of monetary policy easing.

NOTABLE ASIA-PAC HEADLINES

China RRR cut for all banks is seen as likely, according to China Securities Journal. Subsequently, PBoC cuts banks Reserve Requirement Ratio (RRR) by 25bp, to keep liquidity ample. Effective from December 5th. Will strengthen the implementation of prudent policy. Focus on supporting the real economy and preventing flood-like stimulus. To release circa. CNY 500bln in long-term liquidity.
UK Cabinet Office instructed central government departments to stop installing Chinese-made surveillance systems in sensitive sites due to security risks, according to FT.
Beijing City reports 1,119 (prev. 863) COVID infections on November 24th as of 3pm, according to a health official; Guangzhou, China will not be put into lockdown, according to an official; the coming week will be key for COVID control; Nanjing City, China is to conduct mass COVID testing for five days from November 26th.

DATA RECAP

Tokyo CPI YY (Nov) 3.8% vs Exp. 3.6% (Prev. 3.5%); Ex. Fresh Food YY (Nov) 3.6% vs Exp. 3.5% (Prev. 3.4%)
Tokyo CPI Ex. Fresh Food & Energy YY (Nov) 2.5% vs Exp. 2.3% (Prev. 2.2%)