EUROPEAN FX UPDATE: Buck bolstered post-FOMC minutes, Aussie jolted by jobs data

Analysis details (10:30)

DXY

The Dollar and index faded from best levels after extending gains on the back of broad risk aversion and further weakness in EM currencies rather than independent factors per se, although the Atlanta Fed GDPNow model for Q3 was upgraded from an already lofty level, to 5.8% from 5% and the latest FOMC minutes contained one hawkish line in particular (most officials see significant upside inflation risks that may warrant more tightening). The DXY finally breached a key technical hurdle in the form of the 200 DMA on the way to probing 103.500 and held above the pivotal chart level within a 103.590-370 range ahead of IJC updates and the Philly Fed Business Index.

AUD/NOK

At opposite ends of the G10 spectrum, the Aussie suffered a double whammy as the labour market report revealed an unexpected fall in employment and firmer than forecast unemployment rate, while the Yuan extended its slide irrespective of more intervention by China’s state banks. Aud/Usd slumped from 0.6428 to 0.6366 at one stage via a Fib retracement just above the round number, and Aud/Nzd extended its retreat to 1.0782 from 1.0822. Conversely, the Norwegian Krona saw enough in the Norges Bank’s accompanying statement to test bids/support around 11.5000 vs the Euro compared to a peak near 11.6000 even though it matched consensus for a 25 bp hike. Specifically, the Bank signalled another rate rise in September assuming the economy evolves as is currently anticipated, adding that activity remains high, the jobs situation is tight, CPI has eased, but is still markedly above target and underlying inflation is elevated. However, Eur/Nok bounced off lows when the Norges Bank Governor hinted that the next tightening move may be the last in the cycle during the post-meeting press conference.

JPY/GBP/CAD/CHF/EUR/NZD

All narrowly mixed against the Greenback, as the Yen clawed back from sub-146.50 towards 146.00 irrespective of bleak Japanese trade data and no jawboning even though Usd/Jpy surpassed last year’s actual intervention thresholds. Meanwhile, the Franc pivoted 0.8800, the Loonie contained declines under 1.3550 to a minimum amidst reports of hefty offers in Usd/Cad around that mark, in contrast to the Pound that struggled to maintain 1.2700+ status in the face of a big sell order said to be initiated at 1.2735. Elsewhere, the Euro remained depressed below 1.0900 and beneath a key Fib in addition to an array of topside option expiries and the Kiwi felt some sympathy with its Antipodean peer inside 0.5943-04 confines, albeit also taking note of RBNZ remarks courtesy of Governor Orr and Chief Economist Conway. In short, the former reiterated that the current level of rates is constraining inflation and expressed confidence that inflation pressures are coming out now, while the latter gave warning of a significant downturn for the construction industry.

EM

As noted above, the Cny and Cnh continued to wilt and needed more support to hold off record lows, and the Inr needed similar intervention to avoid a similar fate, while the Zar got some respite from bearish seasonal factors and weakness in Gold as SARB’s Deputy Governor Tshazibana said the Bank is not in ‘solid’ rate pause mode.

17 Aug 2023 - 10:30- Fixed IncomeData- Source: Newsquawk