EUROPEAN FX UPDATE: Franc firm, Pound perky and Euro elevated vs Dollar

Analysis details (09:59)

DXY/CHF/GBP/EUR

Several negative factors kept the Buck on the backfoot ahead of US CPI data, including a retreat in Treasury yields irrespective of lukewarm receptions for 3 and 10 year issuance, a recovery in the Yuan from deeper lows post-PBoC repo rate cut, strength in Sterling on the back of UK labour market metrics and Euro outperformance on EGB/UST spread convergence. Moreover, the Dollar index lost momentum in its own right after fading just below the prior session high and dipping to a new m-t-d low between 103.620-210 bounds, with some downside possibly due to hedging for/against weaker than forecast inflation readings. The Franc benefited most from the bounce in T-notes and long bond, with Usd/Chf straddling 0.9050, Cable rebounded from a fraction over 1.2500 towards 1.2580 and the Euro probed decent option expiry interest at 1.0785-1.0800 (1.3 bn) on the way to topping the 100 DMA (1.0805) at one stage.

NZD/AUD  

The Kiwi and Aussie regrouped as the Greenback waned and the former also clawed back some losses vs its Antipodean peer on the 1.1000 handle following declines in NAB business confidence and conditions in wake of recent back-to-back ‘surprise’ RBA rate hikes. Nzd/Usd bounced from the low 0.6100 area to just over 0.6150 again and Aud/Usd inched a bit closer to 0.6800 before running out of steam.

CAD//NOK/JPY/SEK

Weakness in WTI and Brent hampered the Loonie and Norwegian Crown, naturally, as Usd/Cad was underpinned within a 1.3342-78 range, but Eur/Nok was also propped up above 10.6000 following an unexpected contraction on Norwegian mainland monthly GDP. Elsewhere, the Yen lagged either side of 139.50 against its US counterpart on divergent BoJ/Fed dynamics even though the FOMC is tipped to skip a tightening beat tomorrow, while the Swedish Krona contained declines awaiting CPI on Wednesday.

EM

As noted earlier, the Cny and Cnh recovered some poise after the PBoC trimmed its 7-day reverse rate by 10 bp and seemed to respond favourably to reports that China is weighing broad stimulus with property support and rate cuts, before taking on board the State Planner issuing notice about lowering costs this year, including exemptions and reduced VAT for small businesses until year-end. Conversely, some payback for the Zar after its recent revival regardless of SA’s Electricity Minister Ramokopa announcing that over 5500 megawatts of renewable projects will be coming online by 2026, with 55 gigawatts of wind and solar projects under development across the country.

13 Jun 2023 - 09:59- Fixed IncomeData- Source: Newsquawk