EUROPEAN FX UPDATE: Buck still buckling, but Loonie lags as oil continues to toil

Analysis details (10:07)

DXY/CAD

The Dollar and index managed to end Friday’s session off worst levels, but still depressed and in an overall downtrend even before sell signals from a few banks for month end rebalancing purposes, and particularly strong ones via Barclays and Citi. However, the Greenback gleaned some traction from firmer Treasury yields ahead of front-loaded refunding and underperformance in the Loonie amidst ongoing weakness in crude prices, partly due to negative demand dynamics and supply-side factors awaiting the delayed OPEC+ meeting. Hence, the DXY held above 103.00 and last week’s 103.170 m-t-d low within a 103.22-53 range and Usd/Cad was underpinned between 1.3623-61 parameters in advance of US new home sales, the Dallas Fed manufacturing business index, 2 and 5 year note supply.

AUD/JPY

At the opposite end of the G10 spectrum, the Aussie shrugged off a retreat in iron ore, the Yuan and broad risk aversion to retest the 200 DMA against the Buck and touched 0.6600 in the process in wake of recent hawkish overtones from the RBA (minutes and speeches by Governor Bullock), while the Yen probed 149.00 vs its US peer with impetus from an upturn in Japanese PPI and reports that the country’s metalworks union is reportedly seeking a pay rise of Jpy 10k+, or over 11%.

EUR/GBP/NZD/CHF

All firmer against their US rival, albeit to varying degrees, as the Euro consolidated gains on the 1.0900 handle, the Pound regained 1.2600+ status with a bit more surety following latest comments from BoE Governor Bailey pushing back against premature rate cut expectations, the Kiwi approached 0.6100 in the slipstream of the Aussie and irrespective of new NZ PM Luxon expressing concern about the risk of recent fiscal deterioration in the run up to a Treasury briefing, and the Franc hovered just below 0.8800 following a downturn in Swiss weekly sight deposits.

SCANDI/EM

The Sek regrouped post-Riksbank fallout from no hike in rates and may have drawn encouragement from steady Swedish household lending, while much stronger than forecast Norwegian retail sales could have helped the Nok cope with Brent’s tumble through Usd 80/brl and the Zar was probably cushioned by Gold’s breach of technical resistance around Usd 2007/oz. Conversely, the Cny and Cnh could not sustain momentum from a 300 pip higher than consensus PBoC midpoint fix, more Chinese stimulus measures or the Beijing Stock Exchange reportedly implementing a new policy preventing major shareholders of Cos from selling stock amid concerns that sales could extinguish the desired rally, as a probe into struggling shadow bank Zhongzhi was launched after it recently warned of severe insolvency.

27 Nov 2023 - 10:07- Research Sheet- Source: Newsquawk