EUROPEAN FX UPDATE: Dollar remains depressed after brief recovery, but Yen wary

Analysis details (09:53)

DXY/JPY

The Buck attempted to bounce and claw back some of last week’s heavy losses that started after the ‘dovish’ FOMC and extended when US jobs data came in below consensus in headline terms, the unemployment rate ticked up unexpectedly and the services ISM was weaker than forecast or previously across the board. However, the index barely regained 105.00+ status before retreating from 105.15 to a deeper 105.84 low and would arguably have slumped further without a somewhat reluctant Yen. Indeed, Usd/Jpy was tethered around 149.50 in wake of comments from BoJ Governor Ueda who reiterated that Japan's economy is recovering moderately and is likely to continue to, but the Bank will patiently maintain monetary easing to support activity. On the flip-side, technical resistance in the form of the 21 DMA (at 149.79) capped the headline pair and the first of a series of option expiries at the 150.00 strike (1.2 bn for Monday’s NY cut) presented another upside obstacle.

EUR/CHF/GBP

Decent expiry interest also featured to the topside in Eur/Usd given 1 bn rolling off between 1.0780-85, but the Euro weighed up mixed Eurozone services PMIs and UST-EGB spreads as it consolidated gains against the Greenback on the 1.0700 handle within a 1.0723-56 range. For the record, a less negative than feared Sentix index hardly impacted. Meanwhile, the Franc mainly benefited from its US peer’s ongoing retracement in the absence of anything Swiss specific bar weekly sight deposits showing an increase in domestic bank accounts and Sterling seized on the Dollar’s demise even though US rates were relatively soft at the short end of the curve. Usd/Chf drifted down from just under 0.9000 towards 0.8950, while Cable climbed from 1.2366 to 1.2423 and thereby formed a virtual treble top with adjacent twin peaks from September before the construction PMI fell a tad shy of expectations, albeit still edged up from the prior month.

CAD/AUD/NZD

A hawkish reminder from BoC's Rogers who said a rate hike is on the table until the Bank is confident that we are clearly on our way (to meeting the inflation mandate) and firmish rebound in crude prices underpinned the Loonie ahead of Canada’s Ivey PMIs and the latest BoC Market Participants Survey. Elsewhere, the Aussie braced for a likely RBA hike on Tuesday and kept the Kiwi at arm’s length via the Aud/Nzd cross that was elevated above 1.0850. Usd/Cad straddled 1.3750, Aud/Usd hovered over 0.6500 and Nzd/Usd was mostly just below 0.6000.

SCANDI/EM

The Cny and Cnh derived more impetus at the Usd’s expense and the PBoC’s higher than forecast or previous reference rate, while the Ils gleaned support from the BoI’s up to 10 bn credit line for businesses and the Krw via SK reimposing in short selling ban on equities. In CEE, the Czk coped well with weaker than anticipated Czech IP as Trade data revealed a surplus that was twice as wide as expected. 

06 Nov 2023 - 09:53- Fixed IncomeData- Source: Newsquawk