EUROPEAN FX UPDATE: certain carry and commodity currencies mount comeback

Analysis details (10:26)

DXY

A partial recovery in risk sentiment sapped some of the Greenback’s recovery momentum, while crude benchmarks extended their post-OPEC+ gains and other commodities retained a firm underlying bid to give related currencies a boost. However, the Dollar and index also succumbed to a bout of consolidation on the eve of NFP after somewhat mixed pointers from ISM employment components and the ADP survey, as the DXY pivoted 111.000 within relatively tight 111.350-110.780 confines well inside its w-t-d range. Prior to the BLS release, Challenger Layoffs provide another proxy and jobless claims a more up to date labour market snapshot, while a host of Fed speakers will also help to fill the void.

CHF/EUR/JPY/NZD/AUD

The Franc straddled 0.9800 against the Buck and probed 0.9700 vs the Euro with tacit approval from the SNB, while the single currency rotated around 0.9900 against its US peer eyeing EGB/UST yield spreads and awaiting ECB minutes for any further clues on the near term policy front. Elsewhere, the Yen recoiled into a tighter 144.38-74 band, the Kiwi briefly regained some altitude and marginally topped its post-hawkish RNBZ hike best amidst reports of sell orders in Aud/Nzd that capped the cross just above 1.1300, with Nzd/Usd up to 0.5814 at one stage, but the Aussie gleaned some traction from copper and a decent rebound in the offshore Yuan between 0.6541–0.6484 parameters, irrespective of slightly disappointing trade data.

CAD/GBP

Caution ahead of comments from BoC Governor Macklem and not a lot of leverage from WTI as a result, with the Loonie retreating from 1.3564 to 1.3664, while Sterling failed to derive impetus from a surprisingly strong UK construction PMI given greater concern about UK growth and finances following another ratings outlook downgrade (Fitch following in the footsteps of S&P) and the latest BoE DMP report showing an upward revision to year ahead CPI expectations. Indeed, Cable faded sub-1.1400 and reversed through 1.1300 again in advance of remarks from one of the MPC’s three resident hawks, Haskel, with little reaction to a letter from the Bank to the TSC noting the very poor liquidity conditions before Gilt buy-back intervention.

SCANDI/EM

A decline in Swedish new manufacturing orders and contractionary monthly GDP kept the Sek under pressure, but the Nok underperformed regardless of Brent approaching Usd 94.50/brl as 2022 mainland growth was revised down markedly in Norway’s budget, and the weakened further after the NBH held its 1 week depo rate at 13%.

06 Oct 2022 - 10:26- Fixed IncomeData- Source: Newsquawk