EUROPEAN FX UPDATE: Buck bases and braces for next batch of risk events

Analysis details (10:35)

DXY

The Greenback witnessed more volatility than clarity on the back of Wednesday’s Fed minutes that were deemed ‘hawkish’ on balance, but revealed little new in terms of policy insight and no guidance on the size of the next rate hike expected in February. However, the Dollar clawed back some declines and the index found a foothold just above its pre-release low (103.800) to hold within a 103.980-104.420 range awaiting a busy agenda, including more proxies for NFP via Challenger Layoffs, ADP and the jobs components of the final services and composite PMIs, while initial claims will provide a timelier snapshot of the labour market. Note also, speeches from Harker, Bostic (scheduled twice) and Bullard may shed more light on FOMC intentions.

CHF/EUR/JPY   

Little rhyme or reason behind modest outperformance in the Franc, Euro or Yen, as most majors settled down into relatively confined and familiar ranges following their midweek exertions. Usd/Chf veered down from just over 0.9300 towards 0.9260, Eur/Usd maintained grips around 1.0600 with respect given to 10 and 21 DMAs (1.1631 and 1.1612 respectively) and Usd/Jpy fluctuated either side of 132.00 amidst sourced reports suggesting that upgrades to the BoJ's inflation forecasts are unlikely to trigger immediate rate hikes, as it is said to be increasingly focused on super core CPI in context of gauging price trends.

AUD/CAD/NZD/GBP

There was a bit more rationality and inevitability about the lags in cyclical and activity currencies given recent strength, and especially for the Aussie that has been feeding off various Chinese-induced positives. Thus, Aud/Usd drifted down further to test 0.6800 from just shy of 0.6850, Usd/Cad bounced from sub-1.3500 ahead of Canadian trade data, Nzd/Usd faded from just above 0.6300 and Cable touched 1.2000 having been around 1.2078 at one stage. For the record, very little reaction to Aussie, Chinese or UK services and composite PMIs that were mostly firmer than forecast.

EM

The Cny and Cnh firmed off another multi-month PBoC midpoint fix high, with added impetus via beats in China’s Caixin PMIs and more reopening of borders between the mainland and HK, but the Zar was undermined by a pullback in Gold through Usd 1850/oz on a mixture of Usd stability and US Treasury yield retracement from recent lows.

05 Jan 2023 - 10:35- Fixed IncomeData- Source: Newsquawk