EUROPEAN FX UPDATE: Buck still struggling to find its feet in advance of the Fed

Analysis details (10:23)

DXY

The Dollar is slipping again having bounced from Friday’s lows and the index climbing towards 107.000 before fading between 106.890-106.250 parameters vs the prior session’s 106.100-107.350 extremes. This week’s major event is almost certain to be the FOMC policy meeting and guidance from the Fed rather than the rate hike itself as 75 bp is almost baked in, but the Greenback will be taking cues from US data along with external factors in the run up to Wednesday. 

CHF/JPY

Nothing really new on the domestic front, but the Franc is on a weaker footing and marginally underperforming other low yielding and funding currencies on cost of carry considerations as bonds back-track from the extremely elevated levels reached by the end of last week, with latest Swiss sight deposit balances suggesting that the SNB stepped back from intervention. Usd/Chf is hovering near 0.9650 in tandem with Eur/Chf just shy of 0.9850, while the Yen is holding a tad above 136.50 having retreated from just over 136.00 vs the Buck amidst comments from the BoJ’s two new Board members Takata and Tamura that imply less dovish leanings than their predecessors - see posts on the Headline Feed at 9.21BST and 9.14BST for more. 

AUD/CAD/NZD/GBP/EUR

All deriving momentum from their US rival’s latest downturn, with the Aussie and Euro also boosted by a spike in iron or prices overnight and Russia contenting that it has no intention of cutting gas supplies to Europe completely. Aud/Usd is eyeing 0.6950 inside circa 1 bn option expiry interest at 0.6750 and 0.7000, while Eur/Usd is probing 1.0250 where 1.86 bn expiries reside. Prior to that, Eur/Usd was capped by a pretty downbeat German Ifo survey to counter hawkish ECB rhetoric via Kazaks hot on the heels of Holzmann, Nagel and President Lagarde. In short, all metrics were weaker than forecast and compounded by dire statements from the institute (details on Headline Feed at 9.00BST), while the Latvian GC member said September’s hike needs to be fairly substantial and a too weak Eur poses a problem.at the 1.0250 strike. Elsewhere, the Loonie is back on the 1.2800 handle, Sterling has reclaimed 1.2000+ status firmly and the Kiwi is hovering above 0.6250.

EM    

The Cnh and Cny have been underpinned by the PBoC issuing a notice of support for the recovery of cultural and tourism sectors plus reports of a Chinese property fund worth up to Usd 44 bn, but the Try was undermined by a decline in Turkish manufacturing confidence to exacerbate all the other negatives afflicting the economy and investor sentiment.

25 Jul 2022 - 10:23- Fixed IncomeResearch Sheet- Source: Newsquawk