EUROPEAN FX UPDATE: Dollar remains deflated on disinflation dynamic

Analysis details (10:04)

DXY

Little sign of respite for the Greenback as bears continued to pounce on the latest CPI report and perceptions of less Fed tightening assuming the slowdown in inflation carries on. The index extended to the downside having lost sight of 101.00 and the Buck hit new 2023/multi-month lows against several rival currencies amidst positioning for the prospect of one more 25 bp hike from the FOMC in July and done. The DXY lost momentum around 100.500 within a 101.610-220 range and could have been even weaker without verbal intervention from Japan, and this time in view of recent Yen strength rather than depreciation from the main man in FX circles, Kanda. Next up for the Dollar and its peers by default, jobless claims, producer prices, Fed’s Daly and Waller.

NZD/AUD     

No real need to spell out the catalyst, as the Kiwi and Aussie forged more gains at the expense of the Greenback thanks to their high beta characteristics. Nzd/Usd probed 0.6350 and Aud/Usd approached 0.6850 with a marginal lag or drag in wake of downbeat Chinese trade data.

GBP/CHF/EUR/CAD/JPY

Sterling might have gleaned some independent impetus via UK GDP holding up better than expected in May, but in truth it remained a Buck story as Cable made a firm breach of 1.3000 on the way to scaling 1.3050, while the Franc hurdled 0.8650, the Euro vaulted 1.1150 and left decent option expiry interest behind (1.1 bn between 1.1120-25), the Loonie tested resistance ahead of 1.3150 post-hawkish BoC hike on Wednesday, and the Yen got to within single digit pips of 138.00 before the aforementioned Japanese jawboning. On that note, Kanda acknowledged the sharp reversal in Usd/Jpy (and other Yen crosses presumably) in context of a view that speculative short positions are unwinding rapidly and the notion that the deflationary norm in Japan may be changing.

SCANDI/EM

The Sek maintained bullish corrective impulses following somewhat mixed Swedish money market CPIF expectations and the Nok derived more traction from buoyant crude benchmarks, while the Cny and Cnh contained their trade-related disappointment with help from the latest PBoC fix, but the Czk was hampered by slightly softer than consensus Czech CPI prints to an extent. 

13 Jul 2023 - 10:04- Research Sheet- Source: Newsquawk