EUROPEAN FX UPDATE: Aussie and Kiwi lagging, Euro flagging and Yen blagging

Analysis details (10:30)

DXY/EUR/JPY

The Dollar index pulled back further from Wednesday’s new y-t-d and multi-year peak before finding support just under 109.500 within a 109.480-880 band as the Euro popped over parity and the Yen pared more losses from its worst levels in around 24 years. However, Eur/Usd will be prone to further volatility and a potential break from recent ranges pending the outcome of the ECB policy meeting (probability skewed towards a 75 bp hike) and tone of President Lagarde’s press conference relative to anything pivotal in terms of fresh guidance from Fed chair Powell who is scheduled to deliver a talk around 25 minutes into his peer’s presser. Meanwhile, the headline pair is straddling parity where very chunky option expiry interest resides (2.2 bn to be precise), with a stack of resistance layered above 1.0000 and support coming in the form of Tuesday’s 2022 low circa 0.9964. Back to Usd/Jpy, all ears were trained on a high level meeting in Japan after yesterday’s spike to almost 145.00, but top currency diplomat Kanda said the confab between the MoF, BoJ, and FSA produced no official statement this time as the basic understanding on FX remains unchanged from the prior gathering. Hence, the Yen retreated through 144.00 again from sub-143.00 and markets are left in limbo waiting for expressions of extreme concern to turn into action.

NZD/AUD

It’s tight down under in terms of the biggest loser, and in truth the Kiwi and Aussie both have cause to underperform given a deceleration in NZ manufacturing sales, bleak Australian trade data and remarks from RBA Governor Lowe confirming that the Bank may be ready to slow the pace of hikes as the benchmark rate has entered the neutral zone. Nzd/Usd is hovering below 0.6050 and Aud/Usd sits south of 0.6750.

GBP

The Pound conceded recovery ground in the run up to PM Truss unveiling her energy price cap bill, with Cable probing 1.1500 to the downside from a 1.1541 peak compared to fresh low since 1985 nearer 1.1400 and Eur/Gbp within a whisker of 0.8700 post-less hawkish BoE testimony.

CHF/CAD

Softer US Treasury yields and perhaps an unexpected dip in Switzerland’s adjusted jobless rate propped the Franc around 0.9750 axes against the Greenback and Euro, while the Loonie held between 1.3150-00 vs its US counterpart amidst a recovery of sorts in oil prices ahead of a speech from BoC’s Rogers and Friday’s Canadian jobs report.

SCANDI/EM

Not much traction from Brent crude for the Nok following much weaker than forecast Norwegian mainland GDP, while the Huf did not derive impetus from Hungarian CPI as the headline matched consensus and core beat, but NBH held its 1 week depo rate. Elsewhere, the Zar might have benefited from Gold keeping its head above Usd 1700/oz and the SA current account deficit narrowing more than anticipated, but remained technically weak.

08 Sep 2022 - 10:30- Fixed IncomeData- Source: Newsquawk