EUROPEAN FX UPDATE: Buck rivals benefit from, or bring about big reversal

Analysis details (10:21)

DXY/EUR/JPY

An even sharper fall from grace for the Dollar and index by default and design, with declines broadening and deepening just a day after hawkish vibes from Fed chair Powell, Bullard and Evans. Perhaps the writing was on the wall and upside momentum waning anyway, as the DXY only managed a pop to 110.250 when Powell spoke and came under renewed pressure in wake of an ECB sources piece suggesting that another 75 bp hike may be in the offing next month along with a discussion about beginning QT. Subsequently, Japanese verbal intervention to halt the Yen’s slide was arguably given more gravitas by BoJ Governor Kuroda joining in, with Usd/Jpy now down around three hundred pips from Wednesday’s nigh on 145.00 peak, while Eur/Usd is probing 1.0100 from a sub-0.9900 midweek trough and pulling away from decent option expiry interest below (par and 0.9950 strikes) to leave the index dangling within a 109.540-108.350 range.

AUD/NZD   

Notwithstanding the strength of Yen and Euro rebounds vs the Greenback, the biggest gainer was the Aussie that was also buoyed by renewed risk appetite and a revival in underlying base metals. Indeed, Aud/Usd staged a near 2 percentage point comeback to 0.6877 with Nzd/Usd tagging along to top 0.6150 and the Kiwi encouraged by a marked recovery in NZ electronic card spending before a Fitch upgrade (foreign-currency Issuer Default Rating to AA+, outlook stable). 

CHF/GBP/CAD

All taking advantage of the US peer’s demise, and the Franc unfazed by remarks from the SNB acknowledging the currency’s appreciation in context of Swiss inflation, while the Pound breached near term technical and psychological resistance in tandem with the Loonie amidst a marked bounce in crude benchmarks ahead of Canadian jobs data. Usd/Chf retreated through 0.9600 from just over 0.9700, Cable got within a whisker of 1.1650 from circa 1.1500 and Usd/Cad recoiled from a fraction under 1.3100 to sub-1.3000.       

SCANDI/EM

Only a short-lived downturn in the Nok on the back of softer than expected Norwegian headline and core CPI readings and the same applied to the Cnh and Cny following below forecast Chinese inflation metrics, but the Try lagged in the face of higher oil prices and irrespective of Turkish President Erdogan contending that other nations are in line to make a sizeable investment.

09 Sep 2022 - 10:21- Fixed IncomeEconomic Commentary- Source: Newsquawk