EUROPEAN FX UPDATE: Aussie reels as RBA hike comes with less hawkish guidance

Analysis details (10:07)

AUD/NZD

The devil was clearly in the detail for the Aussie, and specifically a subtle tweak to the statement accompanying the RBA’s 25 bp Cash Rate rise to 4.35% overnight. The Bank will now let data determine whether more tightening is needed rather than explicitly saying that further hikes may be required and this resulted in Aud/Usd retreating from just above 0.6500 to 0.6418, while the Aud/Nzd cross reversed from almost 1.0900 to sub-1.0850 even though Nzd/Usd fell in sympathy between 0.5969-16 parameters. For the record, the Kiwi was largely indifferent to the RBNZ’s policy review for foreign bank branches, but the Aussie may have been hampered by mixed Chinese trade data in context of the two countries renewing relations.

DXY/CAD/EUR/GBP/JPY

After regaining composure over the course of Monday’s session, the Dollar and index extended recovery gains with the latter forming a firmer base on the 105.00 handle within a 105.25-63 range amidst renewed risk aversion, weakness in oil and regardless of a broad reversion to bull-flattening in bonds. Consequently, virtually all DXY components recoiled further from recent highs, with the Loonie back below 1.3750 as WTI crude slid from Usd 81.05/brl towards Usd 79.00/brl ahead of Canadian trade data, the Euro losing momentum above 1.0700, Sterling fading around 1.2350 and eyeing support into 1.2300, and the Yen beneath 150.00 yet again. Note, 2.4 bn option expiries in Eur/Usd from 1.0660-50 offered a prop, but 1 bn at 150.00 in Usd/Jpy were less influential following weaker than expected Japanese household consumption and in line total cash earnings, and the Pound may have been undermined by BoE’s Pill rather than UK data. To recap, the Chief Economist mused that the MPC may be able to think about easing by the middle of next year and this could have overshadowed a jump in m/m Halifax house prices and BRC sales coming in above consensus.

CHF/SEK/NOK

The Franc may have derived some independent impetus from a dip in the Swiss unadjusted unemployment rate, but more or just as likely via the pullback in yields as Usd/Chf pivoted 0.9000 in tight confines. Elsewhere, technical impulses kept the Swedish Krona on track to continue its revival in stark contrast to the Norwegian Crown that had Brent’s collapse to contend with on top of a near reversal in manufacturing output.

EM

A narrower than forecast trade surplus prevented the Cny and Cnh from taking advantage of another strong PBoC midpoint fix, while the Zar lost more ground as the chart backdrop turned more bearish and the Czk was ruffled by a steeper decline in Czech retail sales. Conversely, the Huf took positives from Hungarian ip not sliding quite as much as feared.

07 Nov 2023 - 10:07- Fixed IncomeData- Source: Newsquawk