EUROPEAN FX UPDATE: Buck wanes to the benefit of Kiwi and Pound in particular

Analysis details (10:19)

DXY

The Dollar drifted back down from newly formed peaks amidst a retracement in US Treasury yields and general recovery in risk sentiment, with the index fading ahead of 114.00 between relatively tight 113.900-330 confines, and the Greenback could see further sideways or consolidative trade into month end pending data and the tone of Fed commentary over the remainder of the week. Moreover, Sterling showed more signs of composure after Monday’s capitulation and other DXY components pared losses as a consequence having been dragged down in sympathy when the Pound was in virtual freefall.

NZD/GBP

Cable retested resistance through 1.0800 from a low around 1.0650 as the BoE’s statement restored some calm, while the Kiwi rebounded from circa 0.5631 to probe 0.5700 in wake of remarks from RBNZ Governor Orr overnight, noting that the NZ tightening cycle is very mature, but the Bank needs to do a bit more in terms of hiking rates.

AUD/CHF/CAD/JPY/EUR

All taking advantage of their softer US counterpart, as the Aussie topped 0.6500 at one stage compared to a trough near 0.6450, the Franc bounced from just over 0.9950 to 0.9869 following another reminder from the SNB that it is willing to buy or sell the currency if deemed too weak/strong, the Loonie regained 1.3700+ status from a base not far off 1.3750 alongside a reprieve in crude prices, the Yen held above 145.00 between 114.75-07 parameters and the Euro derived traction from narrower EGB/UST spreads within a 0.9584-0.9671 range.

SCANDI/EM  

A pick-up in risk appetite and the aforementioned upturn in oil helped the Sek and Nok regroup against the Eur rather than mixed Swedish data in the form of trade and producer prices, as the deficit blew out and inflation metrics accelerated. Conversely, the Cny and Cnh remained under pressure after a weaker than forecast PBoC onshore fix, industrial profits turned more negative and the World Bank predicted that Chinese growth will lag the rest of Asia for the first time since 1990. Meanwhile, the Huf was cautious awaiting the NBH with rate rise expectations ranging from 75-100 bp, but far from clear given recent rhetoric intimating that the tightening cycle may be nearing completion.

27 Sep 2022 - 10:19- Fixed IncomeResearch Sheet- Source: Newsquawk