EUROPEAN FX UPDATE: Dollar on a more even keel after Monday’s tumble

Analysis details (10:13)

DXY/EUR/GBP

Far from all change for the Greenback, but it drew positives from a less heavy-handed PBoC midpoint fix, a downturn in overall risk sentiment and wider US Treasury vs other global bond differentials to claw back losses against most peers. Moreover, the index may have been encouraged by the fact that it held just above yesterday’s low (104.420) before rebounding through 104.500 from 104.30 and approaching the prior session high, at 104.820 vs 104.890, while a retreat in the Euro and Sterling on specific factors also helped the Buck regain some poise. Eur/Usd backed off from 1.0768 towards 1.0700 amidst pretty bleak updates from Germany’s VDMA and Ifo institute, with the former noting a lack of impulse to revive business domestically and abroad, adding there is no improvement in sight in the short term, and the latter reporting that the residential construction sector crisis intensified in August, as the number of firms cancelling projects hit at a new high. Meanwhile, Cable was flattered by hot headline UK average earnings temporarily, but faded from 1.2530 and lost 1.2500+ status on the back of a firmer unemployment rate, 200k+ drop in the employment change and zero HMRC payrolls growth, not to mention a 100k back month downward revision to -3k. Back to the Euro, and there was hardly any reaction to ZEW as a beat in economic sentiment was offset by a miss in current conditions.

AUD/NZD

A rebound in the price of iron ore and a relatively firm close for the Cny underpinned the Aussie within 0.6440-17 and 1.0885-60 ranges vs its US and NZ counterparts respectively rather than mixed consumer and business survey findings, while the Kiwi lagged between 0.5924-03 parameters against its US rival irrespective of a pick up in electronic card retail sales. Nzd/Usd was hampered by the pre-election economic and fiscal update that saw the 2023/24 operating balance before gains and losses at Nzd -11.4 bn compared to a Budget forecast of Nzd -7.6bln, or net 43.6% of GDP vs  43.1% and a return to an OBEGAL surplus in 2026/2027 compared to 2025/26.

CHF/CAD/JPY

The Franc remained largely steady and wedged beneath 0.8900, the Loonie leant on lofty WTI to keep afloat of 1.3600 and the Yen was reliant on a combination of psychological and technical support to defend 147.00 as a Fib stood just beyond the round number at 147.12.

SCANDI/EM

Norwegian monthly GDP was stronger than consensus in mainland terms and firmer than previous on a headline basis, but the Nok failed to really benefit as soft CPI continued to weigh. Elsewhere, the Try took heed of the CBRT Governor saying the Bank is implementing a roadmap to ensure disinflation occurs decisively via a selective loan policy, the Czk noted remarks from CNB's Prochazka that discussions about a possible rate cut can start in September, but he certainly does not expect an ease this month, and the Pln extended declines in wake of the NBP’s 75 bp reduction last week.

12 Sep 2023 - 10:13- Research Sheet- Source: Newsquawk