EUROPEAN FX UPDATE: Dollar stands firm in face of further intervention

Analysis details (10:21)

DXY

The Greenback lost a bit of momentum after its firm midweek bounce as several rivals recovered some poise on the back of supportive macro fundamentals, while the Yuan benefited from reports of more Chinese state bank buying and the Yen got a boost from another verbal riposte by Japanese Finance Minister Suzuki. However, the index remained underpinned within a higher 102.910-103.230 range and may have derived a degree of traction from latest Fed Chair Powell comments that seemed a tad more hawkish than the dot plots as he said a strong majority of policymakers see two or more rate rises by the end of this year. He also chimed with consensus looking for an unchanged core y/y PCE in May ahead of data due on Friday, albeit flagging overall PCE at 3.9% and well below expectations. Ahead of all that, Fed’s Bostic, initial claims, final Q1 GDP and pending home sales.

AUD/CNY-CNH

Much firmer than forecast final retail sales gave the flagging Aussie a boost even before the aforementioned touted intervention in the onshore Renminbi that was dipping under the psychological 7.2500 level. Aud/Usd secured a firmer footing above 0.6600 as a result and Usd/Cnh eased back towards 7.2500 from circa 7.2661. 

NZD/JPY/GBP/EUR

All marginally firmer vs the Buck, but the Kiwi still capped beneath 0.6100 even though ANZ’s business outlook and own activity gauges for NY improved, the Yen under 144.00 having fallen to 144.70, the Pound floundering mostly sub-1.2650 and the Euro pivoting 1.0900 irrespective of firmer than previous or consensus German state and Spanish inflation metrics. Note also, Usd/Jpy and Eur/Usd were flanked by hefty option expiries and perhaps drawn to interest at 144.50 (1.5 bn) and between 1.0895-1.0900 (1.8 bn) given their proximity to spot.

CHF/CAD   

The Franc and Loonie were largely sidelined due to a lack of independent Swiss or Canadian impulses, with Usd/Chf meandering from 0.8990 to 0.8965 and Usd/Cad from 1.3278 to 1.3244.

SCANDI/EM

Implied volatility via options may have been excessive with a break-even of 800+ pips, but Eur/Sek was extremely volatile within 11.8175-11.7140 extremes in wake of the Riksbank opting to stick with guidance for a 25 bp hike, as the repo rate path was ratcheted higher and the two dovish dissenters refrained from objecting this time. On the other hand, the Bank ‘only’ upped the pace of bond sales to Sek 5 bn/month from Sek 3.5 bn compared to some expectations for a bigger increase and from September rather than sooner or over the Summer recess, leaving the Swedish Crown somewhat disappointed. For more details and potential FX reserve hedging plans see the Headline Feed at 8.30BST.  Elsewhere, the Krw took heed of Japan and South Korea agreeing to resume their bilateral currency swap deal worth USD 10bln.

29 Jun 2023 - 10:20- Fixed IncomeData- Source: Newsquawk