EUROPEAN FX UPDATE: Buck finding its feet, but Aussie floundering

Analysis details (10:09)

DXY

It could simply have been a classic case of correction and consolidation following overreaction to Friday’s NFP release that was arguably made to look a lot worse in headline terms due to the downward back month revisions, but the Greenback also gleaned some traction from external factors, like another bout of Yuan weakness and Aussie contagion with spillover to commodities and other associated currencies. The Dollar index held fractionally above the prior session low and ground higher within a 102.270-520 range ahead of Employment Trends, Wholesale Sales, the latest NY Fed SCE and several scheduled Fed speakers.

AUD/NZD  

The Aussie faded just ahead of the 0.6700 vs its US rival and remained top-heavy against the Kiwi amidst renewed pressure in the Yuan on the back of softer than forecast Chinese inflation data that prompted more speculation about additional impetus overnight. Aud/Usd retreated through 0.6650 and some distance from decent option expiry interest that the 0.6685 strike (1.1 bn), while the Aud/Nzd cross probed 1.0750 from around 1.0787 as Nzd/Usd pivoted 0.6200 ahead of the RBNZ on Wednesday (no change in the OCR expected).

JPY/GBP/CHF/EUR/CAD

Psychological resistance also kept the Yen in check vs the recovering Buck, but Usd/Jpy closed bearishly from technical perspective on Friday below a Fib retracement level and did not show much inclination to bounce between 142.13-143.00 parameters even though UST/JGB spreads widened a tad or BoJ branch managers did not report any angst over Yen depreciation and ultra-easy policy. Elsewhere, the Pound held most above 1.2800 awaiting remarks from BoE Governor Bailey prepared for his Mansion House appearance to be released around 16.00 BST, the Franc straddled 0.8900 with little reaction to declines in Swiss bank sight deposits, the Euro meandered inside option expiries at 1.0920 and at 1.0970-80 (1.2 bn and 2.1 bn respectively) and barely responded to a worse than expected Eurozone Sentix index, and the Loonie managed to contain losses within 103270-1.3303 confines post-Canada’s mainly upbeat LFS in the face of soft crude prices and ahead of building permits.

SCANDI/EM   

The Nok also got a fundamental boost to protect it from Brent-related downside as Norwegian CPI topped consensus, but the Sek derived little via Riksbank minutes that basically reaffirmed guidance and rationale for June’s rate hike. Meanwhile, the Cny and Cnh needed another strong PBoC fix to prevent steeper losses and the Try required sustenance from Turkish state banks to stem the tide.

10 Jul 2023 - 10:09- Fixed IncomeData- Source: Newsquawk