EUROPEAN FX UPDATE: Dollar dangling ahead of US PPI as yields slide

Analysis details (10:10)

DXY

Trade remained very volatile and price action erratic amidst many moving parts, including ongoing Middle East hostilities, renewed duration demand for bonds that flipped curves from bear-steepening into bull-flattening mode, and dovish shifts in Central Bank policy perceptions. This indecision was typified by choppy moves in the Buck vs majors and very evident when the index bounced from new m-t-d low, at 105.600 to fresh 105.890 intraday high in a matter of minutes. However, the Greenback faced the first of two top tier and potentially pivotal data points in PPI on the eve of CPI that could provide fundamental direction rather than forthcoming FOMC minutes that are dated by their delayed publication and Fed commentary delivered since the prior meeting.

CHF/JPY/XAU  

It was tough to determine whether the Franc, Yen and Gold were underpinned by safe haven premium or softer yields, but suffice to say that they outperformed or displayed resilience against the Dollar within 0.9054-30, 148.96-43 and Usd 1858-70/oz respective ranges. Moreover, Usd/Jpy may have been drawn towards hefty option expiry interest between 148.25-20 as 2 bn was due to roll off.

GBP/EUR/CAD/AUD/NZD

Sterling stole a march on its US counterpart when it was at a low ebb and popped over 1.2300 to set a new multi-week peak, but failed to sustain momentum as UK debt continued to play a prominent role in the broad revival. Meanwhile, the Euro recovered from another dip below 1.0600 vs the Buck and reached 1.6028 before fading, the Loonie hovered mostly above 1.3600 in advance of Canadian building permits, the Aussie regained 0.6400+ status and the Kiwi retained grasp of the 0.6000 handle, albeit with a lag in the face of more Aud/Nzd headwinds.

SCANDI/EM

Some respite for the Nok after Tuesday’s demise in wake of weak Norwegian CPI readings, and for the Zar on a combination of technical retracement and the latest advance in Gold, but the Cny and Cnh ran into more resistance vs the Usd irrespective of a 1100+ pip sub-forecast PBoC midpoint fix for the former.

11 Oct 2023 - 10:10- Research Sheet- Source: Newsquawk