EUROPEAN FX UPDATE: Buck bounces post-FOMC, but Yen slides pre-BoJ

Analysis details (10:13)

DXY/JPY

The Greenback extended post-US PPI losses and was initially weaker after the Fed opted to take a break from hiking with no dissent and the statement said holding the target range steady allows time to assess additional information and implications for policy. However, the skip was followed by a jump for the Dollar as new dot plots within the SEP implied two more 25 bp rate hikes in 2023 to a loftier 5.6% peak than many envisaged. The index rebounded from a 102.660 low to settle a fraction over 103.000 and bounced further overnight when APAC participants reacted to the hawkish guidance that was only partly toned down by Chair Powell in the post-meeting presser, and the Yen was hit particularly hard on the prospect of even wider BoJ-Fed divergence given that the former is seen confirming no change in ultra-easy settings tomorrow. Usd/Jpy spiked from just under 140.00 to bang on 141.50 and helped lift the DXY to 103.380 before the headline pair and index faded, irrespective of above consensus Japanese machinery orders and encouraging exports within the latest trade balance.

AUD/NZD

In contrast to the above, a stellar employment report eventually gave the Aussie enough fundamental impetus to overcome the Buck revival and Aud/Usd reclaimed 0.6800+ status, albeit with a strong tailwind via the Aud/Nzd cross that bounced almost 100 pips from sub-1.0950 as the Kiwi was undermined by confirmation that NZ entered a technical recession in Q1. Indeed, Nzd/Usd let go of the 0.6200 handle having peaked at 0.6236 on Wednesday and making what appears to have been a false break of Fib resistance in the process. 

EUR    

The Euro kept afloat of 1.0800 against the Greenback awaiting independent direction from the ECB that is widely tipped to deliver another 25 bp hike and keep the door ajar for more tightening, but with scope to hop from July to September thereafter given recent cooler than forecast Eurozone inflation data - full preview of the upcoming event available under the Research Suite and to be posted on the Headline Feed in due course.

GBP/CAD

Sterling and the Loonie largely tracked Greenback moves in the absence of anything UK or Canada-centric, with Cable straddling 1.2650 and the Loonie meandering between 1.3354-21 confines, but the latter may take some heed of housing starts and manufacturing sales amidst several primary US data points.

CHF

The Franc lagged within a 0.9056-01 range vs its US counterpart on yield considerations rather than the likelihood of the SNB closing the gap on the Fed next week, though a sharp downturn in Swiss producer and import prices may also have propped up Usd/Chf.

SCANDI/EM

Psychological support rescued the Cnh from deeper depreciation against the Usd as it breached a Fib retracement level following yet another rate cut by the PBoC (1 year MLF on this occasion) and disappointing Chinese macro releases in the form of IP and Retail Sales. Meanwhile, the Sek was undermined by mostly softer Swedish money market CPIF expectations, but the Nok coped relatively well with a much narrower Norwegian trade surplus and somewhat mixed Norges Bank Regional Network Survey - see 9.00BST post on the Headline Feed for details and a link to the full publication.

15 Jun 2023 - 10:13- Fixed IncomeData- Source: Newsquawk