EUROPEAN FX UPDATE: Greenback eases off the gas, but Yen fails to benefit

Analysis details (09:58)

DXY/JPY

The Buck backed off from best levels after its pre-weekend squeeze and perhaps took heed of the ongoing stalemate on Government funding plus Moody’s downgrading its US ratings outlook to negative from stable. However, the Dollar index retained an underlying bid just below 106.00 within a 105.85-68 range and was propped up by further underperformance in the Yen in wake of weaker than expected Japanese corporate goods prices that underlined the BoJ’s scepticism about hitting its inflation target sustainably. Indeed, Usd/Jpy inched closer to 152.00 between 151.40-88 parameters and 1.3 bn option expiries at the round number that could be deemed a cap or draw into the NY cut, with hardly any pull back in response to the usual jawboning from Finance Minister Suzuki (sudden FX moves are undesirable, no comment on levels, but willl monitor markets and respond with a sense of urgency). Meanwhile, the Greenback displayed some caution ahead of Tuesday’s CPI data rather than the NY Fed Survey of Consumer Expectations, though the latter followed hot on the heels of Friday’s rise in UoM inflation projections for one and five year horizons.

CAD/CHF/NZD 

Firmer yields undermined the Franc more than increases in Swiss sight deposits, while the Loonie kept an eye on crude that continued to trade on the soft side and the Kiwi ran into Aud/Nzd headwinds after relatively hawkish RBA remarks in advance of a speech by RBNZ’s Silk and NZ food prices. Usd/Chf hovered above 0.9000, Usd/Cad pivoted 1.3800 and Nzd/Usd was capped mostly under 0.5900.

AUD/GBP/EUR

As noted above, the Aussie was underpinned by comments from acting RBA Assistant Governor Kohler who highlighted that the decline in inflation is set to be more gradual than previously thought and bringing it back to target is likely to be more drawn out as domestic price pressures are widespread. Aud/Usd bounced from 0.6351 to 0.6385 and the Aud/Nzd cross reclaimed 1.0800+ status ahead of NAB business confidence and conditions. Elsewhere, Sterling consolidated on the 1.2200 handle irrespective of UK political upheaval due to the Cabinet reshuffle awaiting BoE’s Breeden and Mann on the eve of labour data and inflation on Wednesday, while the Euro probed 1.0700 as EGB and UST differentials narrowed again. For the record, ECB’s de Guindos spoke but offered little new in terms of policy insight, though did flag a temporary rebound in inflation in the coming months as the base effects from the sharp increase in energy and food prices in Autumn 2022 drop out of the year on year calculation.

SCANDI/EM

A pick up in broad risk appetite gave the Sek some traction, but the Nok was hampered by Brent remaining prone to the downside. Conversely, the Cny and Cnh were cushioned by another strong PBoC fix and hopeful pre-APEC where Chinese President Xi and his US peer Biden plan to meet.

13 Nov 2023 - 09:58- Fixed IncomeData- Source: Newsquawk