EUROPEAN FX UPDATE: Buck still deflated, but Yuan perky as protocols ease

Analysis details (10:32)

DXY

The Dollar remained downtrodden amidst further fallout, or capitulation on the back of October’s comparatively soft CPI data that ramped up Fed pivot expectations. Indeed, the index extended its already enormous and multi-decade declines towards 107.000 (compared to Thursday’s 110.990 intraday high for context) after a relatively tame/dead cat bounce to 108.440, with pressure beyond the basket coming from China where Covid developments took a turn for the better via the lifting of certain restrictions. Probabilities for the December FOMC have shifted decidedly in favour of 50 bp and official commentary hot on the heels of the not so hot inflation update also tilted that way, but it has to be said that the scale and speed of the Greenback’s fall from grace could be deemed overdone given little fundamental change vs such a dramatic transformation in the technical landscape. 

AUD/EUR/NZD/JPY/CHF/GBP

At the risk of sounding repetitive, the Aussie, Euro, Kiwi, Yen and Franc all enjoyed more spoils thanks to the ongoing dumping of Buck longs that should be very evident when the next snapshot of IMM spec account positioning is published. Meantime, Aud/Usd climbed to circa 0.6678 amidst tailwinds from the Cny and Cnh through 7.1000 in response to the Chinese National Health Commission adjusting measures for Covid prevention and control, with quarantine for close contacts cut to 5 days centralised isolation and 3 days home quarantine from 7 centralised isolation and 3 days home quarantine, while quarantine for inbound travellers is trimmed from 10 days to 8 days and it cancelled the circuit breaker for inbound flights. Elsewhere, Eur/Usd rebounded through 1.0200 and 1.0250 on the way to 1.0280, and leaving hefty option expiry interest between 1.0240-50 (2.34 bn) behind, for now at least, Nzd/Usd touched 0.6060, Usd/Jpy tripped stops on a break of 140.00 following a retracement to almost 142.50 in part recognition of Japanese jawboning about further excessive and one-way currency moves, Usd/Chf ducked below 0.9600 and Cable topped out around 1.1774. For the record, Sterling hardly reacted to a raft of mixed UK data, including weaker than forecast monthly GDP for September, as this was adversely affected by the Bank Holiday for Queen Elizabeth’s state funeral.

CAD

The Loonie lagged somewhat, irrespective of strength in WTI, and Usd/Cad could have been underpinned within a 1.3284-1.3361 range in wake of remarks from BoC Governor Macklem on the Canadian labour market, as he contended that it can withstand a slump and avoid a surge in unemployment.

EM

Aside from the Yuan strength on specific factors, broad a bigger gains were forged against the increasingly beleaguered Dollar, but the Lira underperformed again after much weaker than consensus Turkish IP and a wider than anticipated Current Account deficit, and the Peso failed to get much additional impetus from confirmation of a 75 bp Banxico hike yesterday.

11 Nov 2022 - 10:31- Fixed IncomeData- Source: Newsquawk