EUROPEAN FX UPDATE: Euro and Pound under pressure as PMIs plunge

Analysis details (10:27)

DXY/EUR/GBP  

The Euro extended its retreat against the Buck in wake of much weaker than forecast French and German preliminary PMIs, with the manufacturing sector in Germany especially feeble, at sub-40.00 and dragging the composite down into contraction territory. Eur/Usd pulled back from just under 1.1150 to test technical support ahead of 1.1100 initially before breaching the round number to touch 1.1075 and boosting a flagging Dollar index as a result. Indeed, the DXY regained 101.000+ status and posted a new recovery high at 101.330 from 100.880 low before getting a further fillip from Sterling after declines in the ‘flash’ UK PMIs awaiting the US national activity index and preliminary PMIs. The index popped to 101.410 as Cable retested underlying bids/support into 1.2800 compared to a peak around 1.2883, and Eur/Usd slipped again (through 1.1070). 

NZD/AUD/JPY/CAD  

Somewhat mixed NZ trade data did not really hamper the Kiwi as it derived impetus from the Aud/Nzd cross following declines in Australia’s services and composite PMIs to sub-50.0 that overshadowed an upturn in manufacturing, albeit still contractionary. Nzd/Usd almost reached 0.6200 as Aud/Nzd reversed through 1.0900 within a 1.0925-1.0865 range and Aud/Usd lagged between 0.6741-16 parameters. Elsewhere, the Yen clawed back some losses against its US peer in what looked like consolidative price action after Friday’s steep slide and the Loonie also regrouped in relation to its US rival, as Usd/Jpy reversed from 141.81 to 141.23 at one stage and Usd/Cad to 1.3199 from 1.3228. However, Usd/Jpy was also capped amidst reports that the BoJ is said to be mulling a large increase in its 2023 inflation outlook, and could upgrade the FY23 forecast to around 2.5%.

CHF      

The Franc hardly reacted to latest weekly Swiss sight deposits showing drawdowns, but Usd/Chf veered higher within 0.8649-83 confines and seemed to feel contagion with the single currency and Pound.

EM

More manipulation or market massaging by the PBoC via a firmer midpoint fix and familiar musings from China’s Politburo that it will continue to implement prudent monetary policy, but a downbeat assessment of the economy that faces new difficulties and challenges mainly due to insufficient domestic demand (see 10.13 BST post on the Headline Feed for more) kept the Cny and Cnh on the back foot nearer 7.2000 and 7.2100 vs the Usd respectively. Meanwhile, the Ils was undermined by ongoing fallout from Israel's judicial reform even though the President said there is a basis for compromise, as he also noted that gaps remain.

24 Jul 2023 - 10:27- Fixed IncomeResearch Sheet- Source: Newsquawk