EUROPEAN FX UPDATE: Dollar retains momentum after midweek revival

Analysis details (10:11)

DXY

The Greenback continued to grind higher rather than rally as such, but may have gleaned some traction from Fed’s Daly refusing to rule out further tightening and reiterating that rate cuts are unlikely to arrive for some time. Moreover, the Buck could have breathed a sigh of relief that the Senate gave the thumbs up to the stopgap funding bill and the fact that the index managed to limit sub-104.00 losses to a minimum for a second session in succession. However, the DXY recovery remained fragile within a 104.300-560 range ahead of US jobless claims, ip and another raft of Fed speakers, while hefty option expiries across a wide variety of G10 pairs presented almost as many upside obstacles as support levels into Thursday’s NY cut.

EUR/JPY

EGB/UST yield differentials marginally favoured the Euro against the Dollar and kept Eur/Usd elevated between 1.0831-60 parameters and expiry interest spanning 1.0800-55 (1.8 bn at the round number and 1.9 bn from 1.0850 to 1.0855 to be precise). Meanwhile, the Yen probably drew positives from Japanese data as the trade deficit came in narrower than forecast with help via stronger than expected exports and machinery orders beat consensus. Hence, Usd/Jpy drifted down towards 151.00 from just shy of 151.50 and through a 1.4 bn 151.25-20 expiry zone.

NZD/AUD

The Kiwi lagged amidst upside in the Aud/Usd cross and relative resistance in Aud/Usd after a considerably bigger than anticipated rise in Aussie employment and uptick in the participation rate. Aud/Usd meandered from 0.6517 to 0.6462 and was firmly underpinned by 5 bn+ option expiries stacked mostly below, Nzd/Usd drifted from 0.6029 to 0.5972 and was capped by 1.8 bn at the 0.6025 strike, while the cross held above 1.0800.

GBP/CHF/CAD

All marginally softer vs their US peer, but the Pound off worst levels within 1.2377-1.2424 bounds following comments from BoE’s Green that were hawkish leaning on balance. Specifically, she said wage growth in the UK is still incredibly high, there are reasons to be concerned about the persistence of inflation, and questioned whether policy is sufficiently restrictive, adding the MPC might have to stay restrictive for longer and markets globally have not really clocked on to how long Central Banks will need to be restrictive. Elsewhere, the Franc slipped from around 0.8870 to the brink of 0.9000 and the Loonie from 1.3678 to circa 1.3712 ahead of Canadian housing starts.

SCANDI/EM

The Nok took softer Norges Bank survey inflation expectations largely in stride along with a dip in crude prices as Norway raised forecasts for oil investment, but the Huf was hampered to an extent by NBH Deputy Governor Virag flagging a continuation of the easing cycle in November with a 75 bp rate cut. Meanwhile, the Cny and Cnh were content with the outcome of talks between Chinese and US Presidents Xi and Biden, not to mention China’s state planner, NDRC, saying it will continue to expand domestic demand and promote high growth in services consumption.

16 Nov 2023 - 10:11- Fixed IncomeResearch Sheet- Source: Newsquawk