EUROPEAN FX UPDATE: Aussie boosted by Bullock, Euro pressured post-PMIs

Analysis details (10:17)

DXY/EUR

The Greenback extended its broad retreat in tandem with Treasury yields and came under more intense pressure when several technical supports, or resistance in terms of its rivals, were breached. For the Dollar index, a Fib at 105.510 just about held on Monday, but was subsequently probed after a very marginal bounce from the close faded at 105.620 and the DXY slipped to 105.350. However, respite came via the Euro that was undermined by bleak elements within the ‘flash’ Eurozone PMIs, like French manufacturing sliding deeper sub-50.0, German services slipping into contraction and the pan readings all missing consensus. Eur/Usd reversed from 1.0693 to 1.0644 and gave the Buck a fillip as the index bounced back above 105.500 to 105.740.

AUD/NZD

At the other end of the major spectrum, remarks from RBA Governor Bullock ensure that the Aussie remained elevated towards the top of a 0.6379-32 range vs its US peer and nearer 1.0869 than 1.0828 against the Kiwi. In short, she reiterated guidance from the last policy meeting and minutes that the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. As such, Aud/Usd was not hampered by hefty declines in Australia’s preliminary PMIs ahead of CPI data, while Nzd/Usd tagged along with a lag between 005844-72 parameters.

JPY/GBP

The Yen also shrugged aside mostly below forecast Japanese PMIs, perhaps with a bit more attention paid to the BoJ’s median estimate for trend inflation coming in at 2.0% last month for the first time since January 2001 rather than latest source reports inferring that the Bank sees little need to change forward guidance, but may consider whether to tweak YCC given US yield concerns. Usd/Jpy eased back from 149.78 to 149.33 before settling around the 149.50 mark. Meanwhile, Sterling gleaned traction from parts of the delayed UK jobs report and the fact that PMIs were close to consensus, not to mention better on balance than others. Cable pivoted 1.2250 and popped over Fib at one stage (1.2279), while the Eur/Gbp cross straddled 0.8700 and dipped beneath the 200 DMA a fraction shy of the round number.

CAD/CHF

Narrowly mixed vs their US counterpart, as Usd/Cad meandered from 1.3699 to 1.3662 awaiting Canadian new home prices and the BoC tomorrow, while Usd/Chf was tethered around 0.8900 in the absence of anything Swiss specific.

SCANDI/EM

The Sek and Nok remained mainly on the back foot and the former hardly reacted to Riksbank Governor Thedeen on the need to replenish capital (see 10.01BST post on the Headline Feed for details), while the Pln did not derive much impetus via remarks from NBP’s Litwinuk who thinks there are no grounds to lower rates further, in contrast to the Huf that was on a more even keel in the run up to the NBH. Elsewhere, the Cny and Cnh were encouraged by China and the US Treasury Department holding the first meeting of the economic working group which serves as a channel to discuss bilateral economic policies.

24 Oct 2023 - 10:17- Fixed IncomeData- Source: Newsquawk