USD: Softer renminbi helps support the dollar
Yesterday, we published our 2023 FX Outlook and for professional customers our FX Top Trade ideas. Our core message for FX markets in 2023 is to expect fewer FX trends - i.e. a repeat of a clean 18-month dollar trend is unlikely - and instead look for more volatility as central banks tighten rates into a recession. Feedback on the report is welcome!
For today, the dollar has entered a consolidative mode. We note the rise in USD/CNH which may be giving the dollar a little support. Somewhat conversely, the better news out of China seems to be giving the local banks some problems. Here, retail investors have en masse withdrawn from Chinese bond markets in favour of equities, prompting authorities to check with local banks whether they have sufficient liquidity to meet these withdrawals.
For today, we have five Fed speakers. Market pricing for the 14 December FOMC meeting is settling on a 50bp hike - such that any further reference to that today need not demand a much weaker dollar. Our slight bias near term is that long dollar position adjustment may have a little further to run, but that something like the 105 area in DXY proves a 4Q22 base.
Chris Turner