EUROPEAN FX UPDATE: Buck bounces from post-NFP lows on geopolitical grounds

Analysis details (09:53)

DXY/EUR/GBP

The Greenback managed to pare some of Friday’s declines by the close, but remained on the back foot amidst little net change in Fed rate expectations following the latest labour market report that beat consensus convincingly in headline terms with a large helping hand from seasonal factors and was ultimately overshadowed by an unexpected uptick in the unemployment rate along with softer than forecast average earnings. However, the Dollar and index rebounded further due to safe haven positioning following the outbreak of war in Gaza between Israel and Palestine’s Hamas military faction. The DXY gathered momentum and secured a firmer grip of the 106.000 handle between 106.140-600 parameters having been down to 105.950 at one stage post-NFP and the Euro and Pound were hit hardest within the basket. Eur/Usd retreated from 1.0574 to 1.0520 and away from hefty option expiry interest at the 1.0550 strike, while Cable reversed from 1.2225 to 1.2165.

JPY/XAU/ILS

Bucking the overall trend due to their own safety premium, the Yen and Gold outperformed within 149.24-00 and Usd 1833-54/oz ranges vs the Buck respectively, and in stark contrast to the Shekel for obvious reasons. Indeed, Usd/Ils spiked to multi-year highs beyond 3.9000 before the Bank of Israel stepped in with a pledge to curb volatility and provide liquidity via a programme to sell up to Usd 30 bn in FX and a swap mechanism of up to Usd 15 bn.

AUD/NZD/CHF/CAD

No shock that the high betas and activity currencies bore the brunt of risk aversion sparked by the heightened Middle East conflict, with Aud/Usd probing 0.6350 to the downside from circa 0.6381 and Nzd/Usd hovering under 0.6000. Meanwhile, the Franc contained losses against the Greenback either side of 0.9100, partly as a traditional safe haven and also taking note of a rise in weekly Swiss sight deposits after last week’s softer than consensus CPI data. Elsewhere, the Loonie was underpinned by a sharp recovery in oil prices on the intensified geopolitical tensions as it meandered inside 1.3679-41 confines.

SCANDI/EM

The extent of Brent’s resurgence was seemingly sufficient to ensure that the Nok rallied irrespective of an unexpected contraction in Norwegian monthly mainland GDP, while the Cny and Cnh shrugged aside preliminary figures indicating that consumption over Golden Week in China was not as buoyant as some were anticipating as the PBoC resumed heavy-handed midpoint fixing trend, and the Czk derived underlying traction from better than expected Czech ip, trade and jobless updates. Conversely, crude importers including the Try, Inr, Idr Thb and Krw all underperformed, predictably.

09 Oct 2023 - 09:53- Fixed IncomeData- Source: Newsquawk