EUROPEAN FX UPDATE: Dollar fades following further upside on risk and rates

Analysis details (10:15)

DXY

The Buck eased from best levels amidst intervention and a loss of technical momentum after extending its post-US PPI recovery gains across the board. A partial pick-up in overall sentiment also sapped some of the Greenback’s strength rather than any real change in fundamentals or GS forecasting the Fed to begin easing by the end of H2 next year and cutting rates at a measured quarterly pace. The Dollar index probed 103.000 within a 103.020-102.760 range, but ran into resistance ahead of the 200 DMA, at 103.290 and after the Buck failed to sustain breaches of other chart levels vs its rivals.

EUR/NZD/JPY/GBP/CHF

As noted above, the Euro lost more ground against the Greenback and Eur/Usd hit lows not seen since August 3rd at one stage when 55 and 100 DMAs briefly gave way before the headline pair bounced from 1.09247 to 1.0959. However, the 50 DMA and hefty option expiry interest at the 1.1000 strike (1.9 bn) remained likely to keep Eur/Usd capped and the same could be said for Usd/Jpy given equally large expiries, albeit much further to the downside at 142.00 (1.8 bn). In fact, the Yen continued to underperform between 145.22-144.67 parameters alongside the Yuan in wake of more weak Chinese data and debt servicing problems. Elsewhere, the Kiwi recovered some poise after a plunge in NZ’s PSI through 50.0, Sterling regained a bid ahead of UK labour data on Tuesday and the Franc benefited from a retreat in US Treasury yields irrespective of drawdowns in weekly Swiss bank sight deposits. Indeed, Nzd/Usd retested offers into 0.6000 from 0.5955, Cable reclaimed 1.2700+ status from just under 1.2670 and Usd/Chf reversed from 0.8779 to 0.8756.

CAD/AUD

A dip in crude prices undermined the Loonie in advance of the latest BoC SLOS and the Aussie suffered another bout of Yuan contagion even though the PBoC set another incredibly lofty Cny midpoint fix. Indeed, Usd/Cad straddled 1.3450 and Aud/Usd traded mostly below 0.6500 within 0.6506-0.6457 confines awaiting RBA minutes for some independent impetus.

SCANDI/EM 

The Nok was also rattled by a downturn in Brent and the Rub was hardly helped by the Kremlin commenting about Rouble weakness as it cited loose monetary policy as the main reason, adding that its depreciation complicates the structural transformation of the Russian economy. Conversely, the RBI and BI stepped in to prop up the Inr and Idr, former before sub-forecast Indian WPI, while the Cny and Cnh derived some support from reports that China set up a taskforce for its largest asset fund manager Zhongzhi after missed trust payments.

14 Aug 2023 - 10:15- Fixed IncomeData- Source: Newsquawk