EUROPEAN FX UPDATE: Buck back in the ascendency after midweek retreat

Analysis details (10:35)

DXY

The Dollar regained some poise and positivity following Wednesday’s marked pullback that was largely prompted by external factors, but also compounded or exacerbated by corrective price action. To recap, the PBoC joined the ranks of those using verbal intervention to temper currency depreciation, while the BoE was forced into more decisive action in an effort to avert a full blown UK financial crisis as Gilts continued their meltdown on debt financing fears following last Friday’s budget. In response, bonds were reprieved and risk sentiment improved broadly, though only temporarily as attention swiftly returns to overriding issues, like the ongoing battle against inflation and energy supply bottlenecks that are working against Central Bank and Government policies aimed at curbing further price rises. Looking at the index as a gauge for the Greenback in general, 112.970-113.790 covers the range on the eve of month end and PCE data that could be pivotal for direction and Fed policy.

NZD/AUD/CAD

It almost goes without saying that the high beta, activity and commodity currencies were always likely to fall harder amidst a downturn in risk appetite having extracted the most upside when conditions turned more favourable yesterday. Hence, the Kiwi did not derive much in the way of impetus from a less downbeat ANZ business survey overnight, as Nzd/Usd reversed through 0.5700 again, while Aud/Usd relinquished 0.6500+ status irrespective of a marginal slowdown in monthly Aussie CPI and Usd/Cad bounced firmly from just above 1.3600 beyond 1.3750 at one stage amidst slippage in oil prices. Next up for the Loonie, Canadian GDP and average earnings.

CHF/GBP/EUR/JPY

All unwinding gains against the US counterpart for the aforementioned reasons, with the Franc back below 0.9800, Sterling waning after respecting resistance around 1.0900 and taking on board another refusal by UK PM Truss to reconsider tax cuts plans, while the Euro failed to glean traction from hyper German state inflation data or the latest raft of mainly hawkish ECB remarks as Eurozone recession concerns continue to dominate. Eur/Usd hovers sub-0.9700 and Usd/Jpy is approaching 145.00 after holding in the low 144.00 area for the second session in succession.

SCANDI/EM  

The Sek held up a tad better than the Nok after minutes from the Riksbank’s mega 100 bp rate hike meeting highlighted worries about inflation and the weak Swedish Crown, while the Cny and Cnh kept heads afloat of yesterday’s record lows after another firm PBoC fix and amidst reports suggesting that Chinese state banks have been instructed to stock up for Yuan intervention. On that note, the Inr was cushioned by more Usd selling by Indian state banks, but the Huf extended declines beneath 400.00 vs the Eur even though the NBH jacked up the 1 week depo rate by 125 bp in line with the last tightening move in the cycle.

29 Sep 2022 - 10:35- Fixed IncomeData- Source: Newsquawk