EUROPEAN FX UPDATE: Euro probes Fib fleetingly and Aussie flanked by expiries

Analysis details (10:05)

DXY/EUR/CHF/JPY

Yields softened across the board, but the Dollar and index paid the price for failing to build momentum and sustain gains following Monday’s mostly upbeat NY Fed manufacturing survey. Moreover, the century mark continued to present a formidable hurdle for the DXY and this played into the hands of all basket components, bar the Loonie, as the index retreated to the brink of last Friday’s 99.578 low within a 99.942-587 range, and thereby unwound all of its post-UoM upside. The Euro advanced from 1.1235 to 1.1275 and briefly through a Fib retracement level before waning on the back of somewhat uncharacteristically dovish-leaning comments from ECB’s Knot (hikes beyond July possible, but not certain and inflation may have plateaued), while the Franc regained 0.8600+ status and the Yen rebounded from 138.92 to 138.10.

GBP/CAD/AUD/NZD

Sterling took advantage of the generally soft Greenback, but still found the going tough above 1.3100 and the Loonie lost a bit of impetus either side of 1.3200 as the clock ticked down to Canadian CPI and other inflation metrics. Elsewhere, the Aussie was underpinned rather than overwhelmed by RBA minutes revealing another tight call between hiking 25 bp or pausing on the grounds that the current stance of monetary policy is clearly restrictive and will become more so, while noting that the economy has slowed considerably with Q2 GDP growth seen around 0.2% Q/Q and consumer spending seen weak. Aud/Usd held just above 0.6800 and was capped below 0.6850 where almost equal and opposing option expiry interest resided (1 bn and 1.1 bn to be precise). However, the Aud/Nzd cross ground higher between 1.0757-1.0804 parameters and this kept the Kiwi contained within 0.6344-0.6293 confines against the Buck in the run up to NZ Q2 CPI.

EM

The PBoC reverted to type with a stronger than expected Cny midpoint fix overnight, but the onshore Yuan and Cnh remained on a softer footing amidst more Chinese stimulus measures (11-point package aimed at unleashing the potential of household consumption) and reports that the US aims to propose investment limits by the end of August (wef from 2024), focused on AI, chips and quantum computing. Note also, Deutsche Bank joined an increasingly long line of institutions cutting forecasts for FY 2023 China GDP, albeit from a loftier 6% to 5.3%. Meanwhile, the Try slumped to a fresh all time low awaiting some support via the CBRT.

18 Jul 2023 - 10:05- Fixed IncomeData- Source: Newsquawk