EUROPEAN FX UPDATE: Buck bounces modestly before US Midterm Elections

Analysis details (10:03)

DXY

Far from a fully-fledged recovery and too premature to make any turnaround Tuesday call, but the Greenback gleaned some traction across the board amidst a firmer rebound in Treasury yields, renewed weakness in the Yuan and general consolidation ahead of impending risk events, kicking off with today’s MidTerm Elections and then CPI data on Thursday. Moreover, the Dollar index may have derived encouragement from the fact that 110.000 was tested on the downside for a second time in two sessions and held as the DXY formed a double base at 110.040 before rebounding to 110.620.

GBP/EUR/NZD/AUD/CHF

Payback for the Pound after Monday’s outperformance as Cable faded just below 1.1550 and retreated through 1.1500 to probe 1.1450, with little reaction to latest comments from BoE’s Pill (see 9.11GMT post on the Headline Feed for details), while the Euro failed to sustain par-plus status irrespective of extended declines in EGBs and hawkish ECB commentary, as hefty option expiry interest in the headline pair exerted a gravitational pull (1.022 bn between 1.0000 and 0.9990 and 1.42 bn from 0.9985-70). Elsewhere, the Kiwi lost momentum around 0.5950 even though NZ inflation expectations rose in the Q4 survey, and on a 2 year horizon especially, the Aussie remained capped beneath 0.6500 in wake of downturns in Westpac consumer sentiment and NAB business confidence alongside conditions, and the Franc pivoted 0.9900 following fairly routine remarks from SNB President Jordan (policy decisions must be based on a firm commitment to the price stability objective and not exclusively on inflation forecasts).

JPY/CAD

The Yen managed to keep afloat of 147.00 and bucked the overall trend after Japan’s Cabinet approved a second supplementary budget and the BoJ’s SOO highlighted risks of a sharp price overshoot, with Usd/Jpy eying support into 146.00, while the Loonie straddled 1.3500 against the backdrop of further choppy trade in oil.

SCANDI/EM

A relatively restrained 2023 Swedish budget bill with Sek 40 bn reforms helped the Sek resume its retracement vs the Eur, but the Cnh and Cny were hampered by more Covid cases in China and the Try for all manner of reasons ranging from Turkey’s hyperinflation and pursuit of perverse monetary policy loosening to combat the situation, to geopolitical angst.

08 Nov 2022 - 10:03- Fixed IncomeData- Source: Newsquawk