EUROPEAN FX UPDATE: bond bears continue to bait Buck bulls

Analysis details (09:59)

DXY/JPY

The Greenback took another brief pause for breath before gaining more ground against the majority of its currency rivals amidst the ongoing rout in debt that prompted more risk aversion, and in turn more demand for the Dollar as a safe haven. All this on the eve of spot month end when the Buck could get an extra boost via rebalancing flows that may be exacerbated given that Friday also marks the last trading day of Q3. Looking at the index for reference, 106.200 traded compared to a 105.940 low as upside momentum gathered pace and the last psychological barrier facing the Greenback in terms of major pairings was breached. Notably, Usd/Jpy finally scaled 149.00 to a fresh 2023 peak and only really faded in consolidation until Japan’s Finance Minister Suzuki repeated the well worn verbal warning about closely watching moves with a great sense of urgency.

CAD/GBP/AUD

Although the Yen’s temporary loss of 149.00+ status was eye-catching from a y-t-d perspective, the Loonie’s retreat to the brink of 1.3500 represented a change in dynamic as crude prices retreated further from recent lofty peaks. However, Usd/Cad was conscious if not capped by hefty 1.3 bn option expiry interest at the round number. Elsewhere, the Pound continued to wane above 1.2200 against its US peer against the backdrop of softer UK short end rates and yields, but Cable held ‘comfortably’ above 1.2150 and the first of two Fib retracement levels straddling 1.2100, while the Aussie contained declines sub-0.6400 vs the Greenback with some indirect support gleaned from a firmer Yuan following an even larger deviation from neutral midpoint fix by the PBoC overnight.

EUR/NZD/CHF     

All narrowly mixed against their US counterpart, albeit largely in corrective trade rather any meaningful or convincing inflection point that might lead to a change in overall direction. The Euro bounced from 1.0570 to test 1.0600 where 1.7 bn option expiries were due to roll off at the NY cut, while the Kiwi remained tethered around 0.5950 and the France beneath 0.9100 within a 0.9117-50 range.

SCANDI/EM     

Some payback for the Sek after significant retracement on day one of the Riksbank’s FX reserves hedging remit, and perhaps a steeper decline in Swedish PPI was a factor, while the Huf was cautious awaiting the NBH and anticipated full merge of rates at 13% with little support from a narrower than forecast Hungarian current account surplus. Meanwhile, the Try clawed back some losses from a record low and could have gleaned encouragement from reports of higher Turkish net and gross reserves, according to bankers, and the Cny and Cnh used the aforementioned solid PBoC reference rate platform to hold above perceived floors in context of daily parameters.

26 Sep 2023 - 09:59- Research Sheet- Source: Newsquawk