EUROPEAN FX UPDATE: Aussie elevated post-Chinese GDP, Pound perky post-UK CPI

Analysis details (10:15)

AUD/NZD/GBP

The Aussie edged closer to 0.6400 against the Greenback following a clean sweep of forecast-beating Chinese data, including GDP, IP and Retail Sales that prompted several banks to up their estimates for full year 2023 growth to just above the official 5% target level. However, Aud/Usd faced hefty option expiry interest above the round number given 1.5 bn rolling off at the 0.6440 strike and did not derive much in the way of independent impetus from RBA Governor Bullock overnight as she largely echoed the tone of the latest set of minutes. In sum, the Board is a bit more worried about the inflation impact from supply shocks, but sees demand slowing and per capita consumption declining, while the full impact of past tightening has not been felt yet and the Bank believes it is running along a narrow path, but is very alert to upside inflation. Meanwhile, the Kiwi piggy-backed its Antipodean peer, though Nzd/Usd remained heavy on the 0.5900 handle as the Aud/Nzd cross nudged higher to probe 1.0800 from 1.0790, and it was a similar story for Sterling vs the Buck with Cable struggling to sustain momentum above 1.2200 in wake of firmer than expected UK headline and core inflation metrics. In fact, the Pound waned even though the all services measure ticked up from the previous month and the perception was that sticky CPI vs softer average earnings would keep the BoE on track to hold rates again in November.

DXY/CAD/CHF/JPY/EUR

After reversing all and more of Tuesday’s US Retail Sales-related gains, the Dollar succumbed to further downside pressure and the index was forced to defend 106.000 again before regaining some composure within a 106.010-320 range. The DXY may have been propped up by psychological support against the Euro at 1.0600 with an added layer of protection coming from 1.3 bn option expiries between 1.0595 and the big figure, while Usd/Jpy stayed on track to test 150.00 having rebounded strongly and swiftly from its swoon when sources reported that the BoJ was contemplating another upward revision to inflation forecasts yesterday, and a dip on a hawkish view from ex-BoJ’s Sakurai (see 10.06 BST post on the Headline Feed for more). On the flip-side, the flagging Loonie got a fillip from higher crude prices after cooler than consensus Canadian inflation data resulted in dovish BoC pricing and GS along with JPM changing their forecast to no change next week from a 25 bp hike. Usd/Cad eased back between 1.3658-26 parameters, albeit cushioned by 1.1 bn expiry interest at 1.3610-00, while the Franc recovered from sub-0.9000 to reach 0.8975 at best.

SCANDI/EM   

Yet more talk by Riksbank members, but nothing really new left the Sek in limbo, but for the record Governor Thedeen downplayed the prospect of rapid rate reductions in 2024 and said FX hedging is a measure that could be maintained for quite some time, while Floden repeated that inflation is moving in the right direction, but the rapid decline is largely driven by energy prices and the weak Krona is not helping against the fight. Elsewhere, the Zar took mixed SA headline and core CPI largely in stride as technical impulses were still constructive and Gold held firm, but the Cny and Cnh could not get lasting benefit from the aforementioned positive macro releases amidst ongoing default angst (Country Garden missed its coupon payment deadline), and the Inr needed emergency resuscitation from the RBI to stem a swap haemorrhage.

18 Oct 2023 - 10:15- Fixed IncomeData- Source: Newsquawk