EUROPEAN FX UPDATE: Dollar’s rivals take advantage of its relapse

Analysis details (10:10)

DXY

US Treasury yields remained elevated, albeit off overnight peaks after reaching fresh cycle highs, but the Greenback retreated to the benefit of others amidst an upturn in overall risk sentiment and a further erosion of bullish technical impulses. Meanwhile, the WSJ’s Fed watcher Timaraos downplayed the prospect of Chair Powell talking about a higher neutral rate at JH on Friday and the PBoC set its most out of kilter midpoint fix for the onshore Yuan to date. The index faded from 103.370 to the brink of 103.000, at 103.010 and probably paid the price for failing to close above a pivotal Fib level yet again, or sustain upward momentum when setting a new session high at 103.500 on Monday. Next up for the Buck, a few Fed speakers either side of regional surveys, data and minutes from the latest discount rate meeting.

NZD/AUD

It almost stands to reason that the Kiwi would likely benefit more from its US peer’s downturn given recent underperformance, so no real surprise that it secured a firmer grip of the 0.5900 handle in advance of NZ retail sales metrics for Q2, but the Aussie also formed a firmer base above 0.6400 with assistance from ongoing strength in iron ore awaiting preliminary PMIs.

JPY/GBP/EUR

The Yen got some respite as USTs and JGBs stabilised, latter after a wobble post-enhanced liquidity auction where demand weakened, and Usd/Jpy also corrected lower from a virtual double top to probe 145.60, while the Pound breached the 50 DMA on the way to testing 1.2800 and the Euro scaled more hefty option expiry interest at the 1.0900 strike within a 1.0893-1.0930 range, irrespective of a firmer bounce in EGBs from yesterday’s low.

CHF/CAD

A narrower Swiss trade surplus may have hampered the Franc, while the Loonie could have lagged due to the pullback in crude prices, as Usd/Chf hovered just beneath 0.8800, but some way off 0.8750 and Usd/Cad straddled 1.3540.

SCANDI/EM

The Sek took solace from the aforementioned pick up in market mood, but the Nok was undermined by stagnation across all measures of monthly and quarterly Norwegian GDP, the Cny and Cnh failed to maintain recoveries through 7.2700 vs the Usd and the Try largely shrugged off latest remarks from Turkish President Erdogan talking down inflation following a cabinet meeting to discuss measures aimed at combating price pressures. Nevertheless, the Lira trimmed some losses as Turkish and Iraqi Oil Ministers convened on the subject of joint relations and resuming exports via the Ceyhan Terminal.

22 Aug 2023 - 10:10- Fixed IncomeData- Source: Newsquawk