If you’re still doubting the dollar’s importance in every day use, you probably have to wait another year before people start entertaining that argument. The latest numbers from SWIFT this week shows that global payments are still very much all being done with the greenback and this snapshot is quite compelling evidence of that:

The standout points in the snapshot above is that the euro’s share of global SWIFT payments have dropped to a new low while the Chinese yuan’s share has improved to even surpass the Japanese yen – the first since January 2022. That makes it the fourth most used global currency behind the pound, euro, and dollar.

The yuan’s share improved to 4.6% in November and that is quite an improvement from below 2% when it started off back in January this year. Adding to that, the yuan’s share of payments for trade finance rose to 5.7% in November and that sees it surpass the euro (5.6%) as the second-most used currency for global trade finance.

Both currencies of course still pale much in comparison to the dollar in this space, which continues to hold a share of more than 80%.

So, while we are seeing some interesting shifts among other major currencies, the dollar continues to stand tall on its own. It holds nearly 45% of all global SWIFT payments, making it still the runaway leader as the most used global currency.

This article was written by Justin Low at www.forexlive.com.

The snapshot is as per below:

Based on the above, it’s more so now a question of inflation persistence rather than extremely high inflation. Sure, core prices are still much higher than the snapshot we’re seeing but in general it is also reflecting a similar trend. I mean, it is quite telling when you compare it to the snapshot back in August here:

The most evident case of a drop in headline annual inflation is of course in the euro area, although much of that can be attributed to base effects as high energy prices are phased out. They were of course the most impacted by the Russia-Ukraine conflict last year.

But in general, the softer trend here is what is helping to feed the disinflation narrative and aggressive market pricing on rate cuts in recent weeks. The question now is, will we be able to see that final push towards 2% come sooner rather than later? That dynamic will be what determines the push and pull between central banks and markets for next year.

This article was written by Justin Low at www.forexlive.com.

European stocks have pared earlier gains with most regional indices now marginally lower. UK stocks remain the exception with the FTSE 100 being up 0.6%, helped out by the softer inflation report earlier today. Meanwhile, S&P 500 futures are down 0.2% as US futures are also looking rather tepid on the session.

You would think that with softer inflation in the UK, risk trades will be ripping higher on a day like this. That especially since the UK is one where most market players were anticipating to have more stubborn inflation. Instead, we’re getting a rather lukewarm response and mixed flows. If anything else, I’d argue that lighter trading conditions are starting to come about now as we move towards the home straight for the year. That should characterise the remainder of the week as well as trading next week too.

This article was written by Justin Low at www.forexlive.com.

10-year UK gilt yields are down 8 bps currently to around 3.572%, leading the fall in global bond yields on the day. 10-year Treasury yields are also seen down a little over 3 bps to 3.892% and contesting the lows for the year currently. It all comes after the softer UK inflation data earlier today here.

It’s been quite a dramatic turn in the bond market since the end of October, and the ongoing rally certainly looks rather unrelenting. I mean, if even the UK economy – which is expected to see more sticky and high inflation – is also showing signs of weakening price pressures, it just validates everything else that we’re seeing elsewhere. And that vindicates the disinflation narrative that markets have been pricing in over the last few weeks.

This article was written by Justin Low at www.forexlive.com.

• The BoE left interest rates unchanged as expected with no dovish language
  as they reaffirmed that they will keep rates high for sufficiently long to
  return to the 2% target.
• Governor Bailey pushed back against rate cuts
  expectations as he said that they cannot say if interest rates have
  peaked.
• The latest employment report missed forecasts with wage growth
  coming in much lower than expected and job losses in November.
• The UK CPI today missed expectations across the board,
  which is another welcome development for the BoE.
• The UK PMIs showed the Manufacturing sector falling
  further into contraction while the Services sector continues to expand.
• The latest UK Retail Sales missed expectations across the
  board by a big margin as consumer spending remains weak.
• The market expects the BoE to start
  cutting rates in Q2 2024

JPY

• The BoJ kept its monetary policy unchanged with interest rates at -0.10% and
  the 10 year JGB yield target at 0% with 1% as a reference cap.
• Governor Ueda repeated once again that they won’t
  hesitate to take easing measures if needed and that they are not foreseeing
  sustainable price increases unless wage growth picks up.
• The latest Japanese CPIshowed that inflationary pressures
  are easing although they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate remained unchanged near cycle lows.
• The Japanese Manufacturing PMI fell further into contraction but
  the Services PMI ticked higher remaining in expansion.
• The latest Japanese wage data beat expectations and as a reminder
  the BoJ is focusing on wage growth to decide whether to tweak its monetary
  policy.
• The market expects the BoJ to hike
  rates in Q2 2024.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY pulled
back to the resistance zone
around the 184.00 handle where we had also the red 21 moving average for confluence. The
sellers stepped in with a defined risk above the resistance to position for a
drop into the 176.32 level and further added to the bearish bets following
today’s miss in the UK CPI data.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have an
upward trendline around
the 181.00 handle where the buyers might try to lean onto to fade the latest
drop and position for a rally back into the 184.00 resistance. The sellers, on
the other hand, will want to see the price breaking lower to increase the
bearish bets into the 176.32 level.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the pair approaching the trendline. This
is where the battle between the buyers and sellers should get more interesting
as a break to the downside should see the bearish momentum increasing and
leading to a drop into the 176.32 level.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. Today, we have the US Consumer Confidence reports.
Tomorrow, we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the Japanese CPI, the UK Retail Sales and the US PCE data.

This article was written by FL Contributors at www.forexlive.com.

That comes after the softer-than-expected UK CPI data today, with the firm anticipating the BOE to keep with a 25 bps rate cut per meeting starting from May 2024 until the bank rate reaches 3% in May 2025.

This article was written by Justin Low at www.forexlive.com.

• The Fed left interest rates unchanged as
  expected with a shift in the statement that indicated the end of the tightening
  cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t
  push back against the strong dovish pricing and even said that they are focused
  on not making the mistake of holding rates high for too long, which implies a
  rate cut coming soon.
• The US CPI last
  week came in line with expectations with the disinflationary progress
  continuing steady. This was also confirmed by the US PPI the
  day after where the data missed estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The US Retail Sales last
  week beat expectations across the board as consumer spending continues to hold.
• The latest ISM Manufacturing
  PMI
  missed expectations falling further into contraction, while the ISM Services PMI beat
  forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

NZD

• The RBNZ kept its official cash rate
  unchanged at the
  last meeting while stating that demand growth continues to ease and it’s
  expected to decline further with monetary conditions remaining restrictive.
• The New Zealand inflation data missed expectations supporting the
  RBNZ’s stance.
• The latest labour market report showed a notable increase in
  the unemployment rate and a slowdown in wage growth which is something that will
  keep the RBNZ on the sidelines.
• The Manufacturing PMI fell further into contraction
  followed by the Services PMI which fell back into contraction.
• The market expects the RBNZ to start
  cutting rates in Q3 2024.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD surged
to new highs following the surprisingly dovish FOMC decision and it’s now
testing a key trendline. This is
where we can expect the sellers to step in with a defined risk above the
trendline to position for a pullback into the upward trendline and eyeing a
break lower. The buyers, on the other hand, will want to lean on the upward
trendline where they will find the 21 moving average for confluence.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that in case of a
pullback the buyers will also find the 50% Fibonacci retracement level
around the trendline for further confluence. From a risk management
perspective, the buyers will have a much better risk to reward setup around the
upward trendline to target the 0.64 handle. The sellers, on the other hand,
will want to see the price breaking below the trendline to invalidate the bullish
setup and increase the bearish bets into the 0.6050 support.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
pair is diverging with
the MACD right
at the key trendline. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. Some aggressive buyers might want to lean
on the minor upward trendline to position for a breakout to the upside and
target the 0.64 handle. The sellers, on the other hand, will want to see the
price breaking below the trendline to confirm the reversal and target the 50%
Fibonacci retracement level.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. Today, we have the US Consumer Confidence report. Tomorrow,
we get the latest US Jobless Claims data, while on Friday we conclude the week
with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

• Prior -35

The slump in UK factory orders eases in December, with the headline reading being the highest since September. That being said, it’s still a poor reading overall but at least output expectations did see a rise to +5 from -7 in November.

This article was written by Justin Low at www.forexlive.com.

• The Fed left interest rates unchanged as expected with a shift in the statement that
  indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long, which implies a rate cut coming soon.
• The US CPI last week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The US Retail Sales last week beat expectations across the board as
  consumer spending continues to hold.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected with the usual caveat that
  it’s prepared to raise the policy rate further if needed.
• BoC Governor Macklem recently has been leaning on a more
  neutral side and even started to talk about rate cuts although he remains
  uncertain on the timing.
• The recent Canadian CPI missed expectations across the
  board and the underlying inflation measures eased, which was a welcome
  development for the BoC.
• On the labour market side, the latest report beat expectations
  although the unemployment rate ticked higher again.
• The Canadian PMIs continue to fall
  further into contraction as the economy keeps on weakening amid restrictive
  monetary policy.
• The market expects the BoC to start
  cutting rates in Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD is
testing the key swing level at 1.3382. The price looks a bit overstretched as
depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move. The buyers are likely to step in here with
a defined risk below the low to target a rally into the trendline.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair has
been consolidating around the key level recently as the buyers are starting to
pile in. Some aggressive sellers might lean on the red 21 moving average to
target a break below the low and extend the selloff into the 1.3225 level. From
a risk management perspective, the sellers will have a much better risk to
reward setup around the trendline where they will also find the confluence with the
previous swing low level and the 50% Fibonacci retracement level.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD coming
into the key swing level. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. This should be another layer of confluence
for the buyers with the trendline being the natural target. A break above the
recent resistance zone
at the 1.34 handle should see the buyers increase their bullish bets into the
trendline. The sellers, on the other hand, will try to defend the level and
fold as soon as the price breaks higher.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. Today, we have the Canadian CPI data. Tomorrow, we
will get the US Consumer Confidence report. On Thursday, we get the Canadian
Retail Sales and the US Jobless Claims data, while on Friday we conclude the
week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

• Prior +2.9%
• Core CPI +3.6% vs +3.6% y/y prelim
• Prior +4.2%

No change to the initial estimates as this reaffirms a continued slowdown in euro area inflation pressures last month.

This article was written by Justin Low at www.forexlive.com.