EUROPEAN FX UPDATE: Greenback continues to defy gravity and interventionist activity

Analysis details (10:34)

DXY

Residual rebalancing and event risk loomed in the form of key US core PCE data, but the Dollar remained relatively resilient and firmly underpinned, with the index forming a solid base above 103.000 between 103.230-540 parameters and the Buck withstanding more selling pressure beyond the basket. In short, the Greenback regained bullish momentum amidst more mainly hawkish Fed rhetoric and several upbeat macro releases that underscored the narrative that the economy can absorb higher rates without a crash landing or at least cope better than others. On that note, personal consumption and the Chicago PMI will be eyed post-Q1 GDP upgrade and pre-manufacturing ISM next week.

NZD/GBP/AUD

The activity or cyclical currencies held up fairly well on the back of buoyant risk appetite, and the Kiwi also got another confidence boost from an improvement in ANZ consumer sentiment to compound the less bleak business outlook and recovery in own activity to stay in close proximity to 0.6100 vs its US counterpart. Meanwhile, the Pound found support via higher UK yields and implied rates plus a psychological prop bang on 1.2600, and the Aussie continued to derive encouragement from a bumper upward revision to final retail sales and a big push back by the PBoC against the tide of Yuan weakness, albeit largely ineffectual irrespective of more reports of Chinese state bank selling. Aud/Usd retained 0.6600+ status, with added impetus from NAB arguing that the RBA has nothing to gain from delaying further rate hikes ahead of next week’s policy meeting.

JPY/CAD/CHF/EUR  

Yet more verbal intervention from Japan, and this time double-barreled as Chief Cabinet Secretary Matsuno followed the lead from Finance Minister Suzuki, but the Yen probably found support just under 145.00 from export supply rather than latest attempts to talk Usd/Jpy and crosses back down. Elsewhere, the Loonie sat tight around 1.3250 awaiting Canadian monthly GDP and the Q2 Business Outlook for Future Sales, but the Franc and Euro lagged within 0.9015-0.8981 and 1.0836-75 respective ranges regardless of a deceleration in the decline in Swiss consumption or a fall in the KOF indicator after back month revision and a batch of mixed Eurozone data (including German retail sales, jobs, French and EZ inflation).

SCANDI/EM  

Some respite for the Sek after Thursday’s neutral-to-hawkish Riksbank hike following the Swedish Government revising its forecast for 2023 GDP to show a shallower contraction, but the Nok outperformed as the Norges Bank cut its daily foreign currency purchase remit to Nok 1 bn for July from Nok 1.3 bn currently. Elsewhere, a sub-50.0 NBS Chinese manufacturing PMI and slowdown in services kept the Cny and Cnh under pressure, the Czk remained soft even though CNB minutes were clearly hawkish, the Zar retreated further alongside ongoing weakness in Gold and the Rub failed to get much traction from the CBR Deputy Governor stating that the Rouble’s depreciation will be taken into consideration at the next policy meeting in context of its impact on inflation.

30 Jun 2023 - 10:34- Fixed IncomeData- Source: Newsquawk