EUROPEAN FX UPDATE: Buck caught between Yuan revival and Yen relapse

Analysis details (10:33)

DXY/CNY-CNH/JPY

The Dollar drifted back down from best levels forged on the back of Euro weakness and a clean sweep of better than expected US data on Thursday, but the index found underlying bids ahead of 105.000 having faded a fraction below Thursday’s peak at 105.410 vs 105.430. On the one hand, the Greenback was pressured by a rebound in the Yuan after Chinese macro releases exceeded forecasts and boosted broad risk sentiment along with the PBoC shaving 20 bp off its 14-day reverse repo rate, but the Buck was underpinned by renewed weakness in the Yen as US Treasury yields rebounded relatively firmly with 2 year cash back above 5%. Indeed, while Usd/Cny and Usd/Cnh probed 7.2500 and 7.2600 respectively compared to highs just over 7.2800 and 7.2950, Usd/Jpy rebounded from 147.35 to within a few pips of the 2023 peak of 147.87 set on September 8.

GBP/EUR/AUD   

Having plunged partly in sympathy with the Euro yesterday, the Pound regained enough poise to trade back above a key technical level in the form of the 200 DMA vs its US peer with added impetus from Gilts crossing USTs at the 10 year mark and yet another upturn in Brent. Meanwhile, Eur/Usd also recovered on EGB/Treasury spread dynamics and bounced off a multiple bottom to 1.0668 in wake of a hawkish ECB source story pointing to some GC members keeping the door ajar for a hike in December if wages and inflation remain too strong. Elsewhere, the Aussie extended to 0.6473 against its US counterpart before waning as iron ore hit two year highs and the aforementioned Chinese data plus PBoC easing allayed some concerns over a deeper slowdown in growth and contagion.

NZD/CHF/CAD

All barely changed vs their US rival and narrowly mixed, with the Kiwi retaining 0.5900+ status, but still trailing behind the Aussie, the Franc tightly bound around 0.8950 and the Loonie straddling 1.3500 ahead of Canadian manufacturing sales.

SCANDI/EM

Very little movement of reaction to mixed Swedish money market expectations or a rock steady Norwegian trade surplus, but the Try was undermined by the latest CBRT survey showing higher 12 month and year end Turkish CPI projections on top of a softer Lira forecast at sub-30.0000 against the Usd compared to the current 27.0000 level that has been fiercely defended.

15 Sep 2023 - 10:33- Research Sheet- Source: Newsquawk