EUROPEAN FX UPDATE: Dollar indecisive vs rivals in run up to NFP

Analysis details (10:29)

DXY

Having weathered another bout of widespread Yuan induced selling pressure, the Dollar rebounded firmly enough for the index to eclipse Thursday’s peak before fading within a 103.770-480 range and settling down for today’s main event in the form of monthly US jobs data. On that note, August’s labour market report is arguably more pivotal than usual given that there is still scope for the Fed to hike rates at the forthcoming FOMC policy meeting and thereby defy expectations for no change. However, the bar is high and consensus for the headline payrolls number is relatively in line with proxies such as JOLTS, ADP and Challenger Layoffs.

CNY/CNH   

In stark contrast to largely rangy and restrained trade elsewhere, the Renminbi saw plenty of price action overnight as more Chinese banks cut deposit rates, the PBoC played an even heavier hand in terms of the onshore midpoint fix and preannounced a big 200 bp cut in the RRR from 6% to 4% with effect from next Friday. Moreover, China’s final Caixin manufacturing PMI was revised up markedly and poignantly to 51.0 from 49.2 and vs 49.3 forecast. Usd/Cny retreated towards 7.2450 and Usd/Cnh to just under 7.2400 at one stage compared to highs circa 7.2660 and 7.2770 respectively.

CHF/EUR/JPY/GBP/CAD

Very marginal major ‘outperformers’, and the Franc clearly deriving more impetus from firmer than anticipated Swiss y/y CPI rather than the manufacturing PMI missing the mark fractionally. Meanwhile, the Euro appeared to take mainly weaker than expected Eurozone manufacturing PMIs in stride on the basis that the bad news came with bleak prelim services surveys, the Yen maintained recovery momentum irrespective of a sharp decline in Japanese Capex and minor downgrade to the final manufacturing PM, Sterling seemed more relieved than impressed with an upward revision to the final UK manufacturing PMI from the point of view that it was not quite as bad as originally estimated, and the Loonie leaned on solid WTI pre-Canadian monthly and quarterly GDP. Usd/Chf slipped between 0.8846-13 parameters, Eur/Usd held a tight 1.0829-59 line, Usd/Jpy pivoted 145.50, Cable idled within 1.2641-89 confines and Usd/Cad pivoted 1.3500. 

NZD/AUD

The Kiwi and Aussie lagged down under for no obvious reason, though Aud/Nzd veered lower from 1.0870 to 1.0845 as Nzd/Usd held up a bit better within 0.5988-44 bounds in wake of an improvement in ANZ consumer confidence. Conversely, Aud/Usd met stiff resistance at the psychological 0.6500 level and pulled back to prove 0.6450 in advance of the RBA next week.

SCANDI/EM  

More pain for the Sek as Sweden’s manufacturing PMI fell deeper sub-50.0, but the Nok coped better with a slowdown Norway’s manufacturing PMI and uptick in registered unemployment with fuel from Brent. In Latam, the Peso’s retracement from recent peaks vs the Dollar continued following Banxico’s decision to let its short Usd/Mxn hedge book run off.

01 Sep 2023 - 10:29- Research Sheet- Source: Newsquawk