EUROPEAN FX UPDATE: Dollar bid on dips, but restrained by option expiries

Analysis details (10:02)

DXY/EUR/JPY

Having reversed knee-jerk gains in rather perverse fashion given the strength of US growth in Q3, the Dollar and index stabilised once the dust settled to close little changed on the session yesterday. The DXY held just above 106.50 and remained underpinned amidst firmer Treasury yields and a fractionally steeper curve ahead of monthly PCE data, but the Greenback was hampered to a degree by the ongoing prospect of more than mere jawboning from Japanese officials and the proximity of huge 5.1 bn option expiry interest at the 150.00 strike in Usd/Jpy. Moreover, the Euro was cushioned by a cumulative 2.6 bn expiries between 1.0500-10 in the aftermath of the ECB and Eur/Usd regained some poise from Thursday’s sub-1.0550 lows.

AUD/CAD/NZD      

The Aussie also bounced as an acceleration in Q/Q Q3 PPI came hot on the heels of above forecast CPI metrics and added to the case for an RBA hike in November. Aud/Usd secured a tighter grasp of the 0.6300 handle and touched the 21 DMA at 0.6351, while the Aud/Nzd cross probed 1.0900 to leave Nzd/Usd lagging in the low 0.5800 zone irrespective of an improvement in ANZ consumer confidence. Elsewhere, the Loonie recouped more declines vs the Buck with fuel from a rebound in WTI crude following US strikes against IRGC sites in Syria, as Usd/Cad drifted down towards 1.3800 from 1.3831.

GBP/CHF

Relative resilience in UK debt and economic jitters continued to weigh on the Pound, with Cable fading below 1.2150 again and Eur/Gbp still hovering above 0.8700 and the 200 DMA. Meanwhile, the Franc slipped under 0.9000 against the Dollar and 0.9500 vs the Euro on rate differentials and a loss of safety premium irrespective of the geopolitical situation.

SCANDI/EM

No retail therapy for the Sek as Swedish consumption slumped, while the latest Riksbank business survey was downbeat (economic activity expected to continue to slow down and the weakness to persist over the next six months) and FX hedging activity comparatively light. Conversely, the Nok gleaned some support from Brent to offset slightly weaker than consensus Norwegian retail sales, the Zar was underpinned by solid Gold and the Cny/Cnh were cushioned by another extremely compressed PBoC midpoint reference rate.

27 Oct 2023 - 10:02- Fixed IncomeData- Source: Newsquawk