Forex - EUR/USD, USD/JPY Flows: USD knocked by ISM, more downside scope for USD/JPY

 15:11 (GMT) 02 Dec

  [Forex Flows]

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EUR/USD, USD/JPY Flows: USD knocked by ISM, more downside scope for USD/JPY (0101-PWCS-C01)

A weaker than expected ISM manufacturing index has helped take more of the shine off the USD, which had already been tarnished by the tariff talk from Trump. The ISM contrasts with the better PMI data, both for the US and elsehwere seen today, but has nevertheless hit risky assets in general. We would not necessarily see this extensding far against the EUR, but the JPY looks extended above 109, and should have downside to a 108 handle.

EUR/USD, USD/JPY Flows: USD knocked by ISM, more downside scope for USD/JPY (0101-PWCS-C02)

Forex - GBP/USD, EUR/GBP Flows: Boosted by poll results predicitng a big Conservative victory, but upside for GBP looks limited

 23:44 (GMT) 27 Nov

 [Forex Flows]

GBP/USD extends higher to 1.2950 from 1.2900 after the closely-watched YouGov MRP predicting a big 68-seat majority for Conservative, despite GBP having already been rising ahead of the poll results with expectations being discounted. The poll/model is closely followed as it accurately predicted the hung parliament in the 2017 GE, though there is no guarantee it will be accurate this time around. EUR/GBP dropped to 0.85 on the poll release. Some profit-taking likely to be taking place after both pairs hit key technical levels on a news that isn't exactly a major surprise and also in view of the Thanksgiving holiday.
We still take the view that GBP risks are currently more on the downside, with the current pricing of a 70% chance of a Conservative victory unlikely to improve much and the market perhaps becoming less positive about economic prospects even if there is a Conservative victory, with the 10 year bund/gilt spread near the highs of the year, despite the reduction in Brexit uncertainty.

Forex - AUD/USD, USD/JPY Flows: Both fell as Trump signs HK bill, China will be angered

 23:24 (GMT) 27 Nov

 [Forex Flows]

Trump signs the Hong Kong bill that supports the protestors in Hong Kong despite warnings from China that it will take countermeasures. This could jeopardise the prospect for a phase one trade deal. Even though the bill was signed into law, Trump's tone was conciliatory. The fact that even if Trump does veto the bill, it is likely to be override by Congress amid strong support, so China might not pin the blame on Trump and fracture the mended relationship.
However, it is also unlikely China will not follow-thru with countermeasures after making it widely-known. So responses from Chinese officials later in the morning will be closely watched and more likely than not, might extend the risk-off moves in market.
AUD fell in response to the news while yen strengthened. AUD/USD broke recent range floor and fell to 0.6761, lowest since October 17. USD/JPY erased some of the solid gains from Wednesday (lifted on trade optimism and better-than-expected US data). The gains could evaporate further if China follow-up on their threats.

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