EUROPEAN FX UPDATE: Greenback clings on as clock ticks down to CPI

Analysis details (10:22)

DXY

Bearish or corrective forces kept the Dollar capped and subject to selling on upticks, but the index held just above the semi-psychological 105.500 level that basically aligns with a Fib after its latest pull-back within a narrow 105.530-730 range. The DXY popped a tad higher on Wednesday in knee-jerk fashion when FOMC minutes underlined that the majority believe another 25 bp hike may be needed this year, though only reached 106.010 before fading again. However, there may well be a bigger reaction and more sustained move in the Buck if looming US inflation data deviates appreciably from consensus as markets have become more convinced that the tightening cycle has already ended given ‘guidance’ to that effect from various Fed officials based on the tightening impact of higher long term rates on financial conditions.

CHF/EUR//JPY/CAD/AUD

The Franc maintained upside momentum and probed 0.9000 against the Greenback at one stage, while holding firmly above 0.9600 vs the Euro even though Eur/Usd secured a firmer grip of the 1.0600 handle. In fact, the headline pair inched incrementally closer to Fib resistance at 1.0646 from a 1.0615 low amidst a broad and heavy band of option expiries extending from 1.0500 all the way up to 1.0750-55 - details including size of interest at specific strikes available via the Headline Feed at 7.12BST. Elsewhere, the Yen remained bound around 149.00 against its US peer and hampered to an extent by weaker than expected Japanese corporate goods prices and machinery orders, not to mention latest dovish vibes from the BoJ. On that note, Board Member Noguchi said there is no need to rush into responding to the rise in long-term rates and immediately make YCC adjustments, as achieving the 2% inflation goal remains distant. Meanwhile, the Loonie continued to monitor oil prices and the Aussie underlying commodities, overall risk sentiment and the Yuan, as Usd/Cad meandered from 1.3601 to 1.3579 and Aud/Usd hovered over 0.6400 with eyes on 1 bn expiry interest at 0.6425-30.

GBP/NZD

Sterling gained at the expense of its US counterpart for a while, but Cable was unable to retain 1.2300+ status amidst a raft of mixed UK data, cooler than forecast RICS house prices and BoE surveys revealing less credit availability and lower funding volumes. For the record, BoE dove Dhingra and Pill spoke and both highlighted the fact that there is a lot of tightening still in the pipeline. Back down under, the Kiwi lagged in percentage terms vs its US rival and relative to the Aussie following a drop in NZ food prices, with Nzd/Usd waning between 0.6025-0.5997 parameters and the Aud/Nzd cross approaching 1.0700 from 1.0656.

SCANDI/EM

The Sek took a downturn in 1 year Swedish money market inflation expectations largely in stride, while the Cny and Cnh leant on the PBoC’s fix to overcome disappointment with a report in the Securities Journal that Chinese GDP growth might slow in Q3 to above 4.0% Y/Y from 6.3% in Q2, albeit expected to pick up again thereafter. Conversely, the Try took claims by the Turkish Finance Minister that we are getting close to a point where inflation expectations are anchored with a pinch of salt.

12 Oct 2023 - 10:22- Fixed IncomeData- Source: Newsquawk