EUROPEAN FX UPDATE: Aussie stoked and leading major rebound vs US rival

Analysis details (10:22)

AUD

The Aussie overcame Chinese/global growth jitters and a key technical hurdle in the form of the 200 DMA (0.6852) on the way to reaching best levels against the Greenback since mid-December around 0.6884 with assistance via reports that China may lift some of its restrictions on coal imports. Moreover, Aud/Usd gleaned momentum from the strongest PBoC midpoint fix for the offshore Yuan in more than three months overnight and the pair only has one more obstacle to negotiate (December 13 peak at 0.6893) before taking on 0.6900 in the run up to the final services and composite PMIs.

DXY/EUR

A deeper retreat in US Treasury yields, with marginal belly to 10 year benchmark outperformance, and a more pronounced revival in risk appetite undermined the Dollar along with some additional factors, outside the aforementioned renewed Aussie strength. The index faded just shy of Tuesday’s turnaround best (104.860) and lost further momentum within a 104.730-103.800 range when the likes of the Euro displayed resilience in the face of data that looked negative on paper (such as well below forecast German import prices and French inflation - headline and harmonised). Indeed, Eur/Usd held mostly above 1.0600 between 1.0635-1.0541 parameters after regaining 1.0600+ status amidst broader Buck weakness and perhaps caution awaiting the upcoming FOMC minutes, though better than expected Eurozone services and composite PMIs provided a prop as well.

NZD/CHF/CAD/GBP

All taking advantage of their US counterpart’s relapse rather than independent impulses, as the Kiwi rebounded in the Aussie’s slipstream even though the Aud/Nzd cross climbed over 1.0850 from 1.0763 at one stage, the Franc shrugged aside somewhat mixed Swiss CPI metrics (m/m in line with consensus, but y/y slightly softer than anticipated), the Loonie weathered another downturn in crude prices and Sterling took contrasting BoE data in stride (consumer credit and mortgage lending beats vs miss in approvals). Nzd/Usd popped above 0.6350, Usd/Chf got close to 0.6250, Usd/Cad probed 1.3550 and Cable touched 1.2086 from 0.6239, 0.9367, 1.3680 and 1.1956 at the other extremes.

JPY   

The relative laggard following more dovish guidance from BoJ Governor Kuroda, with the Yen unable to sustain gains through 130.00 again vs the Greenback, though comfortably off lows approaching 131.50 on return of Japanese markets from the extra long holiday weekend.

SCANDI/EM

In stark contrast to yesterday, the improved risk mood did not offer the Sek and Nok much support or encouragement as the former took on board a slowdown in Sweden’s services PMI and the latter watched Brent teeter on the brink of Usd 80/brl, but the Zar was bolstered by Gold topping Usd 1850/oz following a few thwarted attempts, the Cny and Cnh were underpinned by the bullish PBoC fixing noted earlier and speculation that China is mulling more support for the ailing property sector.

04 Jan 2023 - 10:22- Fixed IncomeData- Source: Newsquawk