EUROPEAN FX UPDATE: Aussie fundamentally firm, but Yen technically soft

Analysis details (10:08)

AUD/JPY

The Aussie eased back from best levels as the Greenback regrouped after its post-Powell blip, but retained an underlying bid on the back of data showing a rise in November y/y CPI, in line with expectations, a firmer than forecast trimmed mean outturn and a marked upgrade to final retail sales supplemented by a back month upgrade. Aud/Usd held close to 0.6900 within a 0.6926-0.6885 range, as attention turned to trade and Chinese inflation metrics tonight, while the Aud/Nzd cross bounced to almost 1.0850 from just shy of 1.0800 at one stage on Tuesday. Conversely, the Yen lost ground on the 132.00 handle vs the Buck having closed below a Fib retracement level (132.15) yesterday, but pared some declines from circa 132.75 to stay within proximity of decent option expiry interest at the 132.50 strike (1 bn) as Jpy crosses stalled ahead of Japanese current account and trade updates.

DXY

As noted above, the Dollar and index regained some poise following the Fed Chair let down with the latter probably deriving traction and encouragement from holding just above 103.000 to retrench into a slightly tighter range compared to Tuesday (103.100-430 vs 103.020-490). However, the upside was capped by renewed risk appetite and a retreat in US Treasury yields pre-CPI tomorrow and a relatively light agenda beforehand comprising only weekly MBA mortgage applications and Usd 32 bn 10 year supply as the second tranche of this week’s refunding remit.

EUR/NZD/CAD/CHF/GBP

All narrowly mixed, rangy and meandering in comparatively muted midweek trade, or an interim session between the two main events on paper scheduled this week (Powell and US CPI). Indeed, the Euro popped back above 1.0750 before fading again, the Kiwi remained restrained within 0.6350-88 confines in advance of NZ building consents, the Loonie hovered beneath 1.3400 and just over 1.3450 wary of soft WI, the Franc sat under 0.9200 in an even narrower band and Sterling straddled 1.2150.  

SCANDI/EM

The Sek and Nok weakened vs the Eur as ECB’s Holzmann kept up his hawkish mantra with a message that rates need to be hiked a lot more to hit levels restrictive enough to ensure a timely return of inflation to target, while the Czk softened amidst softer than consensus Czech CPI data and the Huf underperformed as Hungary’s budget balance turned more negative. In contrast, the Cnh and Cny gleaned some impetus from reports that Russia will begin buying the onshore Yuan for its wealth fund and the Inr breached the 100 DMA with fuel from weaker crude prices.

11 Jan 2023 - 10:08- Fixed IncomeData- Source: Newsquawk