EUROPEAN FX UPDATE: Dollar rangy and restrained, but resilient in holiday-thinned trade

Analysis details (10:11)

DXY/JPY/CHF

The Buck regained a bit more poise after a relatively firm bounce ensured that the index closed nearer the top of Fiday’s 106.240-105.650 range, and the Greenback ground higher in light turnover amidst multi-centre market closures in Asia before fading again. One could argue that the last ditch deal to avert a US Government shutdown was a positive, but in truth the failure to reach a deal in the run up to deadline day did not unduly rattle the Dollar or DXY. Instead, the index was underpinned by renewed weakness in the Yen irrespective of more jawboning by Japan’s Finance and Cabinet Ministers plus encouraging elements in the latest Tankan Survey. On the flip-side, the BoJ’s September SOO and Governor Ueda stuck to ultra dovish policy guidance and the Bank topped up its scheduled bond buying to keep JGB yields capped. Usd/Jpy edged closer to 150.00 at 149.82 and the DXY held above 106.00, just, between 106.040-360 parameters regardless of a firmer rebound in the Franc towards 0.9100 from 0.9166. Usd/Chf pared back after only minor increases in weekly Swiss sight deposits, a better than forecast manufacturing PMI and not as soft as previous retail sales.

AUD/NZD

Labour Day in NSW may have hampered the Aussie to some extent, while the Aud/Nzd cross probed 1.0700 from just under 1.0750 in the run up to RBA and RBNZ meetings on Tuesday and Wednesday respectively even though Australia’s manufacturing PMI ticked up and NZ building consents fell at a faster pace. Moreover, both Central Banks are widely if not unanimously expected to hold rates and the former retain optionality for another tightening move in the current cycle, but this would still leave the Cash Rate Target at a discount to the OCR. Aud/Usd drifted down from 0.6455 to 0.6395 and Nzd/Usd retained sight of 0.6000 within 0.6009-0.5978 confines.

CAD/EUR/GBP  

The Loonie, Euro and Sterling all gyrated against the Buck with Usd/Cad capped at 1.3600 and cushioned into 1.3500 awaiting Canada’s manufacturing PMI, Eur/Usd eyeing EGB yields in relation to USTs rather than somewhat mixed Eurozone manufacturing PMIs that culminated in an unrevised final pan print as it slipped from 1.0591 to 1.0055, and Cable unable to retain 1.2200+ status within 1.2220-1.2175 bounds following a minor upward tweak to the final UK manufacturing PMI.

SCANDI/EM

Hawkish-leaning Riksbank minutes were largely overshadowed by a more contractionary Swedish manufacturing PMI that undermined the Sek’s technical and reserves hedge related revival, but the Nok was underpinned by faster growth in Norway’s manufacturing sector. Elsewhere, the Cnh straddled 7.3000 vs the Usd in the absence of Chinese participants and no clear-cut direction via China’s conflicting PMIs, while the Try got some good news on the ratings front as S&P upgraded its outlook for Turkey to stable from negative.

02 Oct 2023 - 10:11- Fixed IncomeData- Source: Newsquawk