EUROPEAN FX UPDATE: Buck loses some yield appeal, but retains month-end bid

Analysis details (10:14)

DXY

The Greenback lost a bit more momentum after Monday’s fade on risk and rate dynamics, with the Dollar index closing just off worst levels and shy of the psychological 104.000 mark, but the Buck managed to contain declines across the board as another bank model flagged a buy signal for rebalancing purposes, albeit mild against G10 rivals aside from the Loonie according to Credit Agricole rather than strong in the case of Barclays. Nevertheless, the DXY regained enough poise to probe the round number again within a 104.080-103.820 range ahead of a busier agenda comprising US house price metrics, consumer confidence, JOLTS job openings, Usd 36 bn 7 year supply and remarks from Fed’s Barr.

NZD/AUD   

Having conceded more ground to its Antipodean peer overnight, the Kiwi clawed back some losses in corrective trade as the Aud/Nzd cross waned ahead of 1.0900. However, Nzd/Usd may also have been underpinned on the 0.5900 handle by Fitch affirming NZ’s AA+ rating with a stable outlook, while Aud/Usd could not sustain gains above 0.6450 and got little impetus from RBA’s Bullock. On that note, her comments were largely climate related and balanced in terms of the implications for inflation, though the incoming Governor did add that prices are still too high and that will be her first priority once in situ as Lowe’s successor.

GBP/JPY/CAD/CHF/EUR

All narrowly mixed vs their US counterpart and taking leads from a combination of external factors, positioning for the end of August, near term technicals and more decent option expiry interest. The Pound was perkier on balance between 1.2635-1.2597 parameters as the FTSE played catch-up with its peers post-UK Bank Holiday, while the Yen regrouped and rebounded from 146.60 to 146.32 against the backdrop of softer Treasury yields that more than offset an unexpected rise in Japan’s jobless rate. Elsewhere, the Loonie lagged either side of 1.3600 as crude stalled and CA flagged upside for Usd/Cad, the Euro eased back from 1.0838 towards 1.0800 and the 200 DMA, and the Franc drifted down to 0.8850 from 0.8827.

SCANDI/EM  

A raft of somewhat conflicting Swedish data was overshadowed by another Riksbank member underlining that inflation remains too high and the Sek is undervalued, but Bunge barely gave the Crown a boost. Meanwhile, the Try was undermined by a sharp deterioration in Turkish economic morale and trade deficit blow-out and the Cny/Cnh held steady circa 7.2900 and 7.3000 against the Usd respectively regardless of reports that Chinese banks are mulling deeper deposit rate cuts and the PBoC could lower the RRR sooner than later. Conversely, the Zar rallied in tandem with Gold holding firm and the Huf recovered in advance of the NBH that is forecast to narrow rate corridors further.

29 Aug 2023 - 10:14- Fixed IncomeResearch Sheet- Source: Newsquawk