EUROPEAN FX UPDATE: Euro deflated and propping up the Dollar ahead of PCE

Analysis details (09:57)

DXY/EUR

The Greenback was grinding and seemingly content to retain the bulk of its midweek recovery gains given the prospect of residual rebalancing flows on month end when a sharp retreat in the Euro gave it an extra boost via the index especially as the biggest component in the basket. Indeed, Eur/Usd reversed from 1.0984 to 1.0920 in wake of preliminary inflation data from France that continued the markedly softer than forecast trend set by Germany and Spain in advance of the pan-Eurozone release. This in turn lifted the DXY back above 103.00 and beyond Wednesday’s best within a 102.71-103.21 range awaiting key US macro releases in the form of core PCE prices, jobless claims and the Chicago PMI.

GBP/CAD/CHF

Sterling also benefited at the Euro’s expense, as Eur/Gbp extended its decline from just shy of 0.8650 to 0.8618, but the Pound suffered some contagion against the Buck even though Gilts underperformed Treasuries, as Cable lost grip of 1.2700 again and was hardly helped by downturn in BoE DMP one year CPI expectations. Similar story for the Loonie and Franc, with Usd/Cad climbing from 1.3568 to 1.3607 and Usd/Chf from 0.8718 to 0.8755 irrespective of firmer crude, Swiss retail sales falling much less than previously and the KoF indicator coming in a fraction above consensus, albeit from a downwardly revised prior level. However, the Loonie may have been wary of looming Canadian GDP and the labour market report on Friday, as well.

NZD/AUD/JPY

The Kiwi continued to derive traction from the RBNZ’s hawkish hold and received more support via improvements in ANZ business sentiment and own activity outlook readings overnight, white the Aussie had considerably stronger than expected building approvals to compensate for a steeper than anticipated slowdown in Capex, plus ongoing strength in the Yuan regardless of misses in China’s official NBS PMIs. Hence, Nzd/Usd held a firmer line than Aud/Usd between 0.6153-82 and 0.6615-50 respective parameters, while the Aud/Nzd cross remained depressed either side of 1.0750. Elsewhere, the Yen straddled 147.00 with little independent impetus of clear direction from Japanese ip and retail sales as the former eclipsed and latter undershot forecast, but Usd/Jpy veering higher towards 1.2 bn option expiry interest at the 147.70 strike.

EM

At last some respite for the Try, with Turkish GDP exceeding expectations and the Finance Minister noting a pick-up in capital inflows, while hopes of more stimulus protected the Cny and Cnh from the aforementioned disappointing PMIs.

30 Nov 2023 - 09:57- Fixed IncomeData- Source: Newsquawk