Macro/FX Watch: US exceptionalism still lingers Macro/FX Watch: US exceptionalism still lingers Macro/FX Watch: US exceptionalism still lingers

Macro/FX Watch: US exceptionalism still lingers

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Moves in dollar and dollar pairs extended sharply at the start of the week, and therefore the reversals yesterday were no surprise. More consolidation or recovery could be ahead for the USD as month-end and Thanksgiving flows underpin. However, a potential risk on sentiment through to the end of the year suggests more downside ahead in USD. GBPUSD saw strong gains on the back of hawkish BOE comments and focus turns to the Autumn Statement today where tax cuts could be pre-announced. Yen and yuan continue to remain strong contenders to be the beneficiaries of a weaker dollar, with yuan also supported by PBOC measures.

Key points:

  • Bearish picture intact for USD, but near-term consolidation/recovery likely
  • Cable boosted by hawkish BOE comments, Autumn Statement ahead could cause volatility
  • Yuan continues to garner PBoC support, USDCNH could move towards the 7 handle
  • USDJPY may have peaked, but the path lower will remain bumpy as bears continue to return

USD: Consolidation likely into month-end and Thanksgiving flows

The dollar started the week on a very weak footing, but recovered some of its losses overnight as the moves went too far too fast. DXY index touched near 12-week lows of 103.18 and closed below the 200DMA yesterday but just above the 50% fibo retracement of July low from October high. Momentum is still bearish as markets continue to discount Fed’s higher-for-longer and bring forward the rate cut pricing for 2024. Key levels to watch will be the 61.8% fibo retracement at 102.55. We remain of the view that real rates are too high and could break something. The Fed will remain cautious of that, especially in an election year, and this suggests there is still more room to bring rate cut expectations forward.

However, it remains to be seen how much the bump higher in oil prices upsets the disinflation and economic slowdown story. So far, oil price gains do not appear strong enough to counter the weakening consumer but sensitivity could be higher as excess savings have run out for majority of the income distribution. FOMC minutes from the November meeting reiterated Fed’s coordinated cautious posture, as risks to inflation are still seen on the upside but there were also warnings on tightening financial conditions and fading consumer finances. Big retailers in the US have also been sending warnings on consumers pulling back on big ticket item purchases ahead of the holiday season, and Best Buy and Lowe’s were the latest to join the club of warnings last night with a cut in their forecasts.

Having said that, a weakening US economy does not translate into underperformance of the US economy relative to its peers. The US exceptionalism story has more room to run, which suggests that a sustained downside in dollar could be unlikely. Dollar also still has a heavy yield and carry advantage, and could continue to find intermittent support on dips despite a broader bearish picture. Lastly, soft landing hopes will likely get a reality check in early 2024, further boosting the dollar’s safe-haven appeal. But for now, soft landing hopes, seasonality and yuan strength, all point to a further dollar negative.

Market Takeaway: Bearish picture remains in place in the short-term, but some consolidation/recovery likely ahead. Watch for a move back above 104/104.40 or a break below 102.55.


GBP: Tax cuts eyed

Cable had a strong showing yesterday despite some gains in the dollar. GBPUSD rose to fresh 2-month highs of 1.2559, breaking above the 100DMA. While Fed, BOE and ECB speakers continued to emphasise higher-for-longer, the message continues to find more footing from the BOE rather than the Fed and ECB. Governor Bailey said inflation risks were still on the upside, with wage pressures and Mideast conflict risks underpinning. Mann and Ramsden also said a further interest rate increase was warranted. Haskel suggested disinflationary goods dynamics could be less helpful going forward than in the post-GFC period. Key level to watch now will be the 50% fibo retracement of October low from July high at 1.2589. More data weakness may need to come through to push markets towards a dovish repricing of BOE. EURGBP moved towards the 0.87 handle and Thursday’s PMI readings for Eurozone and UK could be key to assess relative performance.

But for now the focus turns to the autumn budget statement due today from UK Finance Minister Jeremy Hunt. Expectations of tax cuts have risen after PM Sunak’s comments earlier this week. He said that his UK government can begin to cut taxes after inflation has been halved as they expected. UK public finances showed that April-October borrowing of GBP 98.3bn is GBP 16.9bn less than the OBR forecast in March, buoyed by receipts from VAT, income tax and corporation tax that are about 10% higher. This suggests that there is more fiscal room than previously thought. The Times reported that Hunt would cut the headline rates of national insurance for around 28 million people and make tax incentives for business investment permanent.

The announcement can spark volatility in Gilts and GBP. Growth forecasts are likely to be downgraded and market lacks conviction that BOE’s job on inflation is done. Opening the fiscal taps too early could stoke reflation concerns, and bring back memories of the Kwarteng mini-budget last year. There is possibly a thin line between supporting sentiment on tax cuts and stoking inflation fears at this point.

Market Takeaway: GBPUSD could be poised for volatility amid the announcement of the autumn statement. A move above 1.26 could reaffirm bullish momentum while October highs of 1.2337 could provide support.

Source: Bloomberg, Saxo

CNH: PBoC boost could continue

USDCNH bounced higher from 200DMA yesterday as dollar reversed some of its losses, after USDCNH moved from 7.30 to near 4-month lows of 7.1286 in the last few days. A combination of weaker dollar, along with China’s ramping stimulus measures, easing US-China tensions and strong yuan fixings from PBOC have underpinned. Today’s fixing at 7.1254 was again stronger than expected and the lowest since June, and there are signals that the PBOC could remain committed to strengthening yuan further to help make room for any rate cuts that may be needed to boost 2024 growth.

Market Takeaway: Further pullback could test 38.2% fibo retracement of September high from January lows at 7.1120 and break of this could accelerate the move towards the 7 handle.

Source: Bloomberg, Saxo

JPY: Watch jobless claims tonight

Yen and yuan continue to have the largest potential to outperform if the dollar trajectory turned lower. USDJPY slid from ~152 levels to lows of 147.15 yesterday before a recovery back to 148+ levels later. Reversal may be a signal of short-covering, but if the US yields continue to slide lower on the back of increasing pricing for rate cuts for 2024, then the gap to Japanese yields will continue to diminish and this suggests that the path of least resistance for USDJPY is now lower. The move may remain bumpy due to the long-end Treasury yields still seeing upside risks given the US fiscal situation and a huge Treasury supply. But any further dovish data or comments hinting at the need to start Fed easing cycle sooner than currently anticipated will be a positive for yen. Today’s jobless claims could remain key in that regard, as they offer an early window into the fundamentals of the US labor market. Consensus for initial claims is 227k, after the pickup to 231k from 218k last week.

Market Takeaway: Another spike in jobless claims today can bring USDJPY lower to test the 100DMA at 146.61 or the 146 handle.

Quarterly Outlook 2024 Q2

2024: The wasted year

01 / 05

  • Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article
  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article
  • Equities: The AI and obesity rally is defying gravity

    Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

    Read article
  • Fixed income: Keep calm, seize the moment

    With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

    Read article
  • Commodities: Is the correction over?

    Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

    Read article


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.