EUROPEAN FX UPDATE: Dollar on a more even keel ahead of Thanksgiving

Analysis details (10:30)

DXY

There were tentative signs of a recovery, or at least some respite for the Greenback when it exhibited resilience in the face of US existing home sales missing consensus and declining to a 13 year low. Moreover, the index closed towards the upper end of Tuesday’s range and only pulled back a tad below 103.50 before bouncing further to set up a firmer base from a momentum and technical standpoint. The Buck may have derived some impetus from certain parts of the FOMC minutes, as a majority of participants pointed to upside risks to inflation from rising energy prices that could undo some of the recent disinflation, while others noted only limited progress in bringing down core services, excluding housing inflation, and stressed the need to see more data indicating inflation pressures were abating to be more confident of price increases returning to 2%. However, the DXY rebound to 103.920 looked more positional than fundamental after the steep circa 400 tick drop since the start of November and approaching the end of a holiday-shortened week. Prior to that, jobless claims arrive with the weekly tally feeding into this month’s NFP report alongside the often volatile durable goods.

JPY/NZD

Not quite all change, but the Yen and Kiwi bore the brunt of their US rival’s revival having taken most advantage of its travails yesterday, as Usd/Jpy rallied from 148.03 to 149.34 and breached a Fib retracement level along the way, while Nzd/Usd reversed from 0.6064 to 0.6016 and was not helped by Aud/Nzd headwinds in wake of more hawkish RBA commentary.

AUD

It took a while for the Aussie to appreciate latest remarks from RBA Governor Bullock that underlined how concerned the Bank is about inflation even though there were plenty of references to the challenging situation, including the fact that price pressures are increasingly homegrown and demand driven and substantial monetary policy tightening is the right response. She also highlighted higher prices for the majority of goods and services consumed, not just petrol, electricity and rent, and liaison with firms indicating that domestic cost pressure is proving persistent. Aud/Usd gradually edged higher between 0.6528-69 parameters, though the Aud/Nzd cross was more responsive within a 1.0831-71 range, as noted above.

GBP/CAD/EUR/CHF

Sterling retained 1.2500+ status with some support from a more pronounced pullback in Gilts and the Sonia strip awaiting the UK Autumn Statement rather than CBI industrial trends, while the Loonie remained tethered to 1.3700 pre-comments from BoC Governor Machlem and post-Canada’s Fall Economic Update (spending pushed back to leave 2023 deficit largely unchanged). Elsewhere, the Euro pivoted 1.0900 and was capped by a raft of hefty option expiries extending from the round number up to 1.0945 and the Franc straddled 0.8850 in the absence of anything Swiss centric.

EM

Not much lasting traction for the Zar from firmer than forecast SA inflation metrics, and headline CPI especially as the data was not deemed certain to force the SARB into hiking tomorrow. Conversely, the CBRT is widely expected to pull the tightening trigger again, but the Try failed to derive much from an uptick in Turkish consumer confidence or President Erdogan declaring that the period of real Lira depreciation is over. Elsewhere, the Cny and Cnh were undermined by reports that Chinese government advisers are to recommend a 4.5%-5.5% growth target for 2024, while noting that maintaining China's growth pace next year requires more fiscal stimulus, irrespective of the PBoC setting another strong fix and banks said to be buying the onshore Yuan.

22 Nov 2023 - 10:30- Research Sheet- Source: Newsquawk