EUROPEAN FX UPDATE: Buck backs off from post-CPI peaks to the benefit of peers

Analysis details (10:22)

DXY 

Some consolidative price action following Thursday’s relatively pronounced market moves on US inflation data that gave the Greenback a boost and burst the bubble in bonds before another poorly received US debt auction exacerbated the rebound in yields. Twin w-t-d peaks may also have capped the Dollar index as it drifted down into a marginally lower 106.510-280 range awaiting further direction via data including trade, import and export prices, plus preliminary University of Michigan sentiment with all important inflation expectations and more Fed speak.

GBP/EUR/CHF/CAD/AUD

Sterling regained a degree of composure after ceding ground to the bouncing Buck yesterday, as Cable reclaimed 1.2200+ status irrespective of familiar fodder from BoE Governor Bailey who acknowledged progress in terms of tackling UK inflation, but more work to be done and this requires the current level of restrictive policy. Meanwhile, the Euro pared some of its heavy declines between 1.0528-58 against the Greenback and found itself flanked by even bigger option expiries, this time spanning 1.0470-75 to 1.0625-35 and several amounting to 4 bn or more - see 7.24BST post on the Headline Feed for precise details. Elsewhere, the Franc meandered from 0.9088 to 0.9057 in wake of mixed Swiss producer and import prices, the Loonie hovered above 1.3700 with impetus from a Usd 2+/brl recovery in crude prices and the Aussie kept afloat of 0.6300 amidst Aud/Nzd tailwinds.

JPY/NZD

The G10 laggards as the Yen continued to fend of pressure ahead of the psychological 150.00 mark and the Kiwi suffered more pre-NZ election jitters that saw Nzd/Usd drift down towards 0.5900 with little traction from a downturn in electronic card retail sales or deeper contraction in the manufacturing PMI.

SCANDI/EM 

Firmer than forecast Swedish inflation helped the Sek get over any disappointment with the fact that the Riksbank only sold Usd 390 mn for reserve hedging in the first two weeks and no Eur at all, while the Cny and Cnh took mixed Chinese trade, soft CPI and PPI largely in stride with the aid of a 1400+ pip PBoC fix ‘adjustment’ and latest supportive rhetoric (Central Bank official saying stable Yuan has a solid foundation and reiterating that it will resolutely prevent the risk of the onshore unit overshooting, while China will maintain a current account surplus).

13 Oct 2023 - 10:22- Fixed IncomeData- Source: Newsquawk