EUROPEAN FX UPDATE: Greenback/G10 pairings amble ahead of US PCE

Analysis details (10:19)

DXY

The Buck lost some of its US data-inspired recovery momentum when hot Tokyo CPI gave the Yen a boost overnight and month end rebalancing outflows will likely keep the Dollar capped given the fact that Friday is spot settlement day for January 31st. However, the index bounced from a 101.680 low to probe 102.000 again and the Greenback remained underpinned within recent ranges against its major peers and others awaiting PCE as one of the final top tier macro releases before next week’s FOMC.

JPY/NZD/AUD

As noted above, the Yen drew impetus from Tokyo inflation as the headline y/y measure jumped to a 42 year high and core metrics topped consensus, albeit to a lesser degree. Usd/Jpy tested support around 129.50, but stalled and subsequently bounced as Treasury yields continued to climb in response to US GDP and durable goods exceeding expectations and jobless claims falling further below 200k. Elsewhere, the Kiwi was encouraged to revisit 0.6500+ territory vs the Buck in wake of improvements in ANZ business sentiment and activity outlook gauges, and the Aussie tagged along mostly above 0.7100 irrespective of a slowdown in Q4 PPI to quell some of Wednesday’s CPI hype.

EUR/CAD/CHF

All poised and primed to see how the aforementioned key US inflation gauge compares to forecasts and prior levels, with the Euro restrained between 1.0900-1.0866 parameters, the Loonie confined within a 1.3346-13 range and the Franc straddling 0.9200, though mainly under the round number against its US counterpart.

GBP

The major laggard for no obvious or specific reason aside from the fact that Sterling continued to struggle when above 1.2400 vs the Dollar, while Eur/Gbp rebounded from a double base to probe 0.8800 after a retracement from 0.8850. For the record, UK Chancellor Hunt delivered a speech on the economy, but did not divulge much new information ahead of the mid-March budget when rejecting calls from some Conservative Party MPs to bring forward tax cuts and reiterating the pledge to halve inflation - see 9.30GMT post on the Headline Feed for more.

SCANDI/EM

Firm oil prices gave the Nok protection from much worse than feared Norwegian retail sales, but the Sek was exposed to a downturn in consumption in Sweden, slower household lending growth and mixed jobless rates. Elsewhere, the Cnh pared some reopening optimism and the Zar succumbed to more spill-over from the SARB’s decision to hike 25 bp instead of the 50 bp anticipated yesterday.

27 Jan 2023 - 10:19- EnergyData- Source: Newsquawk