EUROPEAN FX UPDATE: Dollar regroups as Euro and others regress

Analysis details (10:01)

DXY/EUR/GBP

Some respite for the Buck as US Treasury yields backed up and risk appetite waned in consolidative trade ahead of the ECB policy meeting, a busy pm data docket and the final leg of this week’s T-note supply. Moreover, the Greenback gleaned traction via a combination of corrective price action and short covering having fallen so far in relatively little time, while the index managed to hold just above 109.500 after a technically bearish close below a Fib retracement level on Wednesday. However, the partial recovery to 109.900 also came courtesy of rival currencies losing upward momentum, like the Euro into 1.0100 and around the 100 DMA, plus the Pound just shy of 1.1650, or 1.1648 to be precise where a Fib aligns with a chart wave. Eur/Usd drifted from circa 1.0094 to 1.0054 awaiting the ECB rate decision and accompanying guidance along with any further adjustments to liquidity instruments and clues about when QT might begin, while Cable probed 1.1600 following its impressive revival from late September flash crash lows. Note, a full preview of the upcoming ECB event, including President Lagarde’s press conference, is available in the Research Suite section of the website.

AUD/CAD/CHF

The Aussie slipped from 0.6500+ peaks amidst mixed import and export price data, and irrespective of Westpac calling for the RBA to hike 50 bp next week against the consensus for another 25 bp rise, as iron ore plummeted, while the Loonie pivoted 1.3550 against the backdrop of simmering oil prices that continued to offset downside pressure caused by the BoC’s dovish half point hike yesterday and the Franc pared gains from just over 0.9850 towards 0.9900.

JPY/NZD  

Both off best levels, but bucking the overall trend reversal to stay ahead of their US counterpart with the Yen remaining closer to the top of its 145.10-146.67 range and the Kiwi straddling 0.5850 in wake of comments from RBNZ Governor Orr (inflation is still too high in an absolute sense and the Bank is firmly focused on meeting its inflation target).

SCANDI/EM

The Nok was boosted by ongoing strength in Brent, but the Sek was blighted by a slowdown in Swedish household lending, declines in sentiment indicators and a warning from the debt office that a rapid downturn in the economy will hit Government finances next year and raise the borrowing requirement. Elsewhere, the Try hardly had time to appreciate a narrower Turkish trade deficit, higher tourist revenue or improvement in economics confidence as the latest CBRT survey revealed another rise in year end inflation forecasts, while the Cnh did not benefit from more Chinese state bank sales of Usd against the Cny as it retreated to almost 7.2500 at one point. Meanwhile, the Mxn was hampered by Banxico Deputy Governor Esquivel suggesting that the Central Bank should begin to think about ending the rate-hiking cycle, like the BCB that held rates again last night.

27 Oct 2022 - 10:01- Fixed IncomeResearch Sheet- Source: Newsquawk