EUROPEAN FX UPDATE: Aussie deflated and Kiwi crushed, but Buck holds up

Analysis details (10:15)

AUD/NZD

The Aussie was already waning due to a loss of technical and psychological momentum before much softer than consensus CPI data compounded expectations that the RBA will likely stand pat on rates when it meets next week, while renewed weakness in the Yuan on the back of another drop in Chinese industrial profits piled more downside on Aud/Usd between 0.6689-19 parameters. However, the Kiwi underperformed within a 0.6168-0.6085 range for no obvious reason other than consolidation, retracement and corrective price action having fared better of late. Indeed, Aud/Nzd rebounded firmly through 1.0900 from just above the round number below as ANZ retained its call for a 25 bp RBA hike and attention down under turned to the latest ANZ business survey findings for NZ and final Aussie retail sales.

DXY/CAD/CHF/GBP/EUR   

In contrast to the above, the Dollar defied gravity given negative rebalancing signals on spot month, Q1 and H1-end, as the index continued to pivot 102.500 and hover above Tuesday’s 102.320 low. This resilience kept the Loonie in check around 1.3200 hot on the heels of yesterday’s cooler than forecast or previous core Canadian inflation metrics, the Franc close to 0.8950 irrespective of a slight improvement in Swiss investor sentiment, the Pound contained between 1.2752-03 confines and the Euro restrained either side of 1.0950. Nevertheless, Eur/Usd remained underpinned amidst more hawkish-sounding ECB vibes from Sintra and beyond, plus mega option expiry interest at 1.0900-10 (3.2 bn) on top of RHS demand in Eur/Gbp that could have been month end-related. For the record, softer than expected Italian inflation did not really ruffle the single currency ahead of the other preliminary national releases and pan Eurozone numbers. 

JPY

Latest words of warning from Japanese Finance Minister Suzuki were largely ignored as the Yen retreated from overnight recovery highs to a lower sub-144.00 low against the Greenback circa 144.26 and Usd/Jpy bulls were encouraged by the ongoing lack of actual action.

SCANDI/EM  

The Nok benefited from some retail therapy as Norwegian consumption beat expectations six-fold, but the Sek was hardly helped by a slowdown in Swedish household spending on the eve of the Riksbank that is forecast to hike 25 bp with potential for a bigger tightening move and options implying a good deal of volatility over the event with a break even vs the Eur of 853 pips. Elsewhere, relief for the Cny and Cnh was very short-lived as both reversed all and more of their post-PBoC/state bank intervention recovery gains in wake of the aforementioned weak Chinese data.

28 Jun 2023 - 10:15- Research Sheet- Source: Newsquawk