29/10/2024
📊 Daily Market Analysis
1️⃣ USD: Dollar Rally Likely Supported by Low Liquidity Risk
The U.S. Dollar remains well-supported amid rising de-leveraging in the FX market due to U.S. election concerns. Increased hedging ahead of a potential Trump victory is evident, favoring more liquid currencies like USD, EUR, CHF, and GBP over less liquid ones such as AUD, NZD, NOK, and SEK. We expect this trend to persist in the days ahead, potentially driving the DXY towards the 105.00 level by election day.
Today’s key U.S. economic releases include September’s JOLTS job openings data and the Conference Board’s Consumer Confidence Index for October, which is expected to show an increase. Unless we see notable weakening in the U.S. macro data, the dollar’s upward trajectory is likely to be supported further, especially with U.S. election hedges and de-leveraging activities increasing.
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2️⃣ EUR: Liquidity-Driven Demand May Support Euro
The euro has found some support due to de-leveraging pressure on less liquid European currencies. This support is partially due to reduced positioning in Scandinavian currencies, often traded against the euro. ECB official Luis de Guindos’ recent hawkish comments about inflation risks slightly dampened concerns over growth and potential aggressive rate cuts.
Nevertheless, the persistent rate differential remains unfavorable for EUR/USD, with the two-year swap spread between the dollar and euro now at 160 basis points, the highest since April. We expect EUR/USD to continue facing downward pressure, trading within a range of 1.0765 to 1.0850 in the short term.
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3️⃣ GBP: Vulnerable as UK Budget Announcement Approaches
The pound is showing vulnerability ahead of the UK Treasury’s budget announcement. Notably, recent political risk hasn’t been factored into GBP pricing, with fair value estimates for EUR/GBP suggesting a short-term target near 0.8340. Additionally, CFTC data as of October 22 shows speculative net-long positions in GBP at elevated levels.
With these factors in mind, GBP/USD may be susceptible to declines towards the 1.2850–1.2800 range ahead of both the UK budget and the U.S. election next week.
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4️⃣ GOLD: Safe-Haven Demand Keeps Gold Supported
Gold continues to hold an upward trend, supported by ongoing geopolitical tensions in the Middle East and U.S. election uncertainty. Strong U.S. macro data has kept hopes for moderate Fed rate cuts alive, supporting Treasury yields and dollar demand, which could limit gold’s potential gains. However, safe-haven flows continue to provide underlying support for the precious metal.
