EUROPEAN FX UPDATE: Euro shorts scramble for cover and spook Buck bulls

Analysis details (10:05)

EUR/DXY

It looks like 1.0200 was a line just too far for Eur/Usd, but the squeeze from circa 1.0060 saw little in the way of resistance once Fibs and the 55 DMA were breached along the way. Market contacts noted stops on a break of 1.0150 as more oversold positions were pared or squared on a combination of factors, including hawkish ECB rhetoric and reports that Russian troops withdrew from key areas in Eastern Ukraine following a counterattack over the weekend. Conversely, the Dollar index recoiled further from 108.860 at best through 108.500 and 108.00 to 107.800 and its lowest level since late August awaiting US CPI data on Tuesday for a potential fillip.

GBP/NZD/AUD/CHF/CAD  

Although the aforementioned Euro rebound also encompassed crosses, the Pound piggy-backed to forge gains against the Greenback irrespective of unsupportive UK macro releases in the form of GDP, IP and Output that overshadowed narrower than forecast or previous trade deficits. Indeed, Cable got to within a whisker of 1.1700 compared to 1.1600 at one stage, even though Eur/Gbp topped 0.8700 again. Elsewhere, the Kiwi rebounded firmly from sub-0.6100 vs its US rival and clawed back some losses relative to the Aussie from under 1.1200, while Aud/Usd drifted higher within a 0.6805-88 range in the absence of any external direction from the PBoC’s Usd/Cny midpoint fix due to a market holiday in China (and HK for the Mid-Autumn Festival). The Franc recovered from below 0.9600 to probe 0.9550 vs the Buck and Loonie from around 1.3050 to reclaim 1.3000+ status.

JPY

Having posted hefty recovery gains on Friday, the Yen lagged somewhat between 142.11-143.49 parameters regardless of further Japanese qualms about its depreciation, this time from Deputy Chief Cabinet Secretary Kihara who said the government must take steps as needed against excessive, one-sided currency moves.

SCANDI/EM

Buoyant risk sentiment rather than political uncertainty underpinned the Sek in wake of a tight Swedish election that seems likely to lead to a change in power from centre-left to right, while the Try was hampered by a wider than expected Turkish current account deficit and reports that some banks have reduced lending amidst higher regulatory costs and risks, and the Czk by softer than consensus Czech CPI readings. However, the Pln underperformed despite comments from the NBP inferring double digit interest rates until 2024 and on the flipside, the Zar outpaced others in what appeared to be corrective price action with some assistance from firmer Gold prices.

12 Sep 2022 - 10:05- Fixed IncomeData- Source: Newsquawk