EUROPEAN FX UPDATE: Greenback grinds after retreat from post-payroll rebound peak

Analysis details (09:43)

DXY/JPY/CNY-CNH

The Buck remained precarious following a fleeting recovery on the back of Friday’s unexpectedly strong headline NFP number and much stronger than forecast average earnings, as the Dollar index erased all and more its data-related upside to post a fresh 104.100 cycle low. However, 104.000 offered some psychological support and the Greenback also gleaned traction from technical levels against several rivals to trade back up at 104.640 amidst firmer US Treasury yields and short term rates that undermined the Yen especially, while countering some of the more pronounced downside pressure exerted by the Yuan of further improvements in China’s Covid situation. In fact, Usd/Jpy rebounded from the low 134.00 area towards 135.50 in stark contrast to Usd/Cny and Usd/Cnh that recoiled from 6.9843 to circa 6.9500 and 7.0189 to 6.9363 respectively as Shenzhen and Shanghai rolled back coronavirus controls over the weekend. Moreover, source reports suggested that 10 supplementary measures may be announced as soon as Wednesday, and the official pandemic status could be downgraded to category B management in January.

AUD/CHF/EUR   

Marginal major outperformers, albeit off best levels following the latest Buck bounce with the Aussie topping out around 0.6850 awaiting the RBA and another anticipated 25 bp hike on Tuesday, and the Franc probing 0.9350 in wake of weekly Swiss sight deposit balances showing yet another decline in domestic bank accounts. Note, unusually large 1.34 bn Usd/Chf option expiry interest between 0.9400-10 looked increasingly less influential, but similar size (1.04 bn) in Eur/Usd at 1.0575-70 could well cap the Euro in the aftermath of somewhat mixed Eurozone services and composite PMIs. 

CAD/GBP/NZD    

All narrowly divergent and relatively restrained vs their US counterpart, as the Loonie derived underlying support from solid crude prices post-OPEC+ (opted to stick with production plan and review next February) either side of 1.3450, Sterling swung around 1.2300 with little reaction to barely revised final UK services and composite PMIs, and the Kiwi pivoted 0.6400, but lagged its Antipodean peer within a 1.0616-56 band.

SCANDI/EM

A hectic start to the week for the Sek eyeing Swedish current account data (surplus narrowed sharply from a markedly revised prior balance), the services PMI (slowed from a slightly downgraded previous pace) and Riksbank minutes (underlining reasons behind the unanimous decision to hike 75 bp - see 8.30GMT post on the headline Feed for more details and a full link to the release). Nevertheless, Eur/Sek was contained between 10.9000-10.8555 and a tad elevated compared to Eur/Nok within 10.3200-10.2700 confines against the backdrop of buoyant Brent. Elsewhere, some respite for the Try as Turkish CPI and PPI cooled more than consensus, and for the politically prone Zar via SA’s Global PMI reclaiming 50.0+ status, though fractionally.

05 Dec 2022 - 09:43- Fixed IncomeData- Source: Newsquawk