EUROPEAN FX UPDATE: Greenback grinds back up again after Friday fade

Analysis details (09:50)

DXY/EUR

The Buck bounced across the board following a loss of momentum amidst various indicators showing a slowdown in price pressures that dissipated some of the heat generated by the latest US CPI data. Moreover, the Dollar regrouped and regained a bid on a combination of technical and positional factors, with the index recovering from just below 109.500 to retest offers and resistance around 110.00 between 109.480-110.120 parameters. Conversely, the Euro retreated through parity irrespective of more hawkish ECB rhetoric/guidance, as chief economist Lane underscored the GC’s determination to tackle inflation even if it means that tighter monetary policy raises the probability of recession in the Eurozone, and Eur/Usd was also undermined by the fact that IMM spec accounts cut short positions significantly pre and post September’s policy meeting. Indeed, the headline pair hovered precariously over key supports in the form of a Fib retracement level (0.9949) and recent low (0.9931 from September 8).

NZD/AUD/CHF/JPY

All weaker against the Greenback, as the Kiwi reversed from just over 0.6000 to 0.5950, the Aussie relinquished 0.6700+ status regardless of a few renewed calls for another 50 bp hike from the RBA next month (instead of a smaller 25 bp), the Franc unwound more of its recent advances to the brink of 0.9700 and the Yen slipped below 143.50 from around 142.65 in thin Japanese holiday trade (Respect for the Aged Day).

GBP/CAD

The Pound failed to retain grasp of the 1.1400 handle without many UK participants due to the state funeral of Queen Elizabeth II, while the Loonie was undermined by another recoil in WTI crude ahead of Canadian PPI and Usd/Cad extended beyond 1.3300 as a consequence.

SCANDI/EM

Similar story for the Nok as Brent probed Usd 90 and lows not seen for just over a week in the run up to the Norges Bank on Thursday, and the Sek also depreciated further awaiting fresh impetus and direction via the Riksbank tomorrow. Elsewhere, the Cny and Cnh both remained 7.0000 vs the Usd for the most part as the PBoC trimmed the 14-day reverse repo rate by 25 bp to more than offset yet another much firmer than market onshore midpoint fix, but the Czk took relatively dovish CNB commentary largely in stride (Frait does not expect likely scenario that would accelerate inflation again, added monetary policy is relatively strict and it’s difficult to find reasons why rates should increase) and the Huf rebounded firmly in the face of ongoing Hungarian-EU angst (Eur 7.5bn funding from Brussels said to be withheld due to rule of law violations regarding corruption in awarding public contracts, according to the FT).

19 Sep 2022 - 09:50- Fixed IncomeData- Source: Newsquawk