EUROPEAN FX UPDATE: Dollar nurses losses as Yen sheds gains

Analysis details (10:23)

DXY/JPY

All change again for the Greenback and Yen after the BoJ maintained its ultra-easy policy settings and Governor Ueda delivered a mostly dovish post-meeting press conference that underlined concerns about responding to an inflation undershoot following a premature rate hike being more difficult than responding to an overshoot. He did acknowledge recent Yen depreciation and reveal that progress updates from the broad-perspective policy review will be posted on the Bank’s website from next month, but added that the BoJ has not changed policy because inflation in Japan is not deemed to be sustainable at present. Usd/Jpy rebounded from sub-140.00 to 141.40 and beyond decent option expiry interest (1 bn at 141.00-10) in almost identical fashion and price action that it did on Thursday in further reaction to the Fed’s midweek hawkish hold, spike or pause depending on how one frames it, and this helped the Buck regain composure broadly, if not uniformly, as the Dollar index climbed from 102.040 to 102.310.

GBP/EUR  

Sterling stole another march on the Dollar and retained a firm tone vs the Euro on the prospect of the BoE matching the ECB with a follow-up 25 bp hike and the Fed in terms of hinting at a higher peak when the MPC gathers next week. Cable topped 1.2800 at one stage and the Eur/Gbp cross consolidated within 0.8565-50 confines after reversing from just shy of 0.8600 in wake of the ECB on Thursday, while Eur/Usd pivoted 1.0950 amidst a raft of largely hawkish GC rhetoric (including Nagel saying the Bank may need to keep raising rates after the summer break) plus a myriad of hefty and some huge option expiries extending from 1.0800 all the way up to 1.1105 - see 7.38BST post on the Headline Feed for exact sizes, strikes or levels. Back to the Pound, and there was little net movement on the back of May’s BoE/Ipsos inflation attitudes survey irrespective of declines in year ahead and 2 year expectations as the longer term 5 year view remained at 3% (top end of target band). 

CHF/NZD/CAD/AUD 

All rangy and narrowly mixed against their US counterpart, with the Franc contained just under 0.8900 where 1.03 bn option expiries underpinned Usd/Chf, the Kiwi meandering between 0.6223-47, the Loonie straddling 1.3225 ahead of Canadian securities and wholesale trade data, and the Aussie testing 0.6900 with more momentum from iron ore, copper and a recovering Yuan. 

SCANDI/EM

Little respite for the Sek, but the Nok retained some recovery gains in line with the Cny and Cnh that got a firmer PBoC onshore fix to build on and yet more Chinese assurances about additional measures to support and stimulate the flagging economy. Conversely, the Try continued to toil as the CBRT’s end of 2023 CPI survey projection climbed and an official from Turkey’s Tusiad Business Group contended that foreign inflows should be used to replenish Central Bank reserves not strengthen the Lira. 

16 Jun 2023 - 10:23- Fixed IncomeData- Source: Newsquawk