EUROPEAN FX UPDATE: booming Buck hits some technical and psychological buffers

Analysis details (10:05)

DXY/JPY/EUR/GBP

Having faded into month and quarter end, the Greenback garnered more momentum from a resumption of the rally in Treasury yields that extended in wake of broadly strong US manufacturing ISM metrics and some hawkish Fed rhetoric. The Dollar index climbed further above 107.000 and probed Fib resistance at 107.170 on the way to reaching 107.210, but stalled fractionally shy of a high from last November at 107.220. Moreover, the Buck failed to nail 150.00 against the Yen where decent option expiry interest (1.1 bn) arguably augmented purported barrier defences more that yet another bout of verbal intervention from Japanese Finance Minister Suzuki (important for currencies to move in a stable manner reflecting fundamentals, will take appropriate steps on FX moves with a sense of urgency, stand ready to respond while closely watching etc). However, he said currency interventions are not targeting levels and whether to carry out intervention is determined by volatility. Nevertheless, the big figure was repelled and Usd/Jpy waned around 149.96 to the detriment of the DXY and benefit of others within the basket, like the Euro and Pound. Indeed, the index retreated to 106.930, Eur/Usd bounced from 1.0461 towards 1.0500 and expiries just below the round number (1.3 bn at 1.0495 to be precise), while Cable reclaimed a key chart level (Fib retracement at 1.2079) within a 1.2062-96 range awaiting more Fed commentary (via Bostic) and JOLTS.

AUD/NZD

The Aussie lost more ground against the Greenback amidst soft base metals and following a copy and paste statement from the RBA to accompany a widely anticipated unchanged rate decision at the first policy meeting under new Governor Bullock’s stewardship. Aud/Usd reversed from circa 0.6367 to new 2023 low only pips from 0.6300 and the Kiwi appeared to suffer a similar fate between 0.5959-04 parameters in sympathy rather than NZ specifics given that NZIER consumer confidence improved in Q3, albeit remaining deeply negative. Instead, Nzd/Usd was depressed in advance of the RBNZ that was expected to hold the OCR steady and issue carbon copy guidance as well, though implied volatility climbed ahead of Wednesday’s policy event to indicate a 42 pip break-even.

CAD/CHF

A deeper downturn in crude prices weighed on the Loonie pre-commentary from BoC’s Vincent, while the Franc was undermined by softer than consensus Swiss CPI data that provided justification for the SNB’s decision to stand pat on rates this month. Usd/Cad climbed from 1.3665 to 1.3716 before topping out and Usd/Chf peaked at 0.9218 compared to a 0.9174 low.

SCANDI/EM

Riksbank’s Bunge may have underpinned the Sek with a higher for longer rate message after its loss of recovery momentum, but the Nok was hindered by Brent’s brief loss of Usd 90+/brl status and the Try needed more Turkish state bank support having largely shrugged its shoulders at fractionally softer than forecast and previous CPI and PPI readings respectively. Elsewhere, the Huf regained some composure as Hungary's Economy Ministry said it asked banks to implement a voluntary cap on interest rates for new loans as of October 9, with a ceiling of 8.5% for households and if they agree then the proposal would see a phasing out of the cap on corporate loans when the NBH benchmark rate decreases to single digits figure before a review of the aforementioned cap on household loans.

03 Oct 2023 - 10:05- Fixed IncomeData- Source: Newsquawk