EUROPEAN FX UPDATE: Greenback grinds back up again alongside Treasury yields

Analysis details (10:16)

DXY

Some calm for the Dollar and index after their midweek maelstrom, or more pronounced retreat amidst bear retracement in bonds prompted by yields reaching new psychological peaks and exacerbated by a big ADP employment miss. The DXY derived support bang in line with Wednesday’s low and eclipsed the prior session close at one stage as USTs lost recovery momentum. However, the index remained relatively contained between 106.500-840 confines and the Buck stayed broadly softer awaiting Challenger Layoffs, jobless claims and NFP on Friday for the next major fundamental driver given its historically loose correlation with ADP.

AUD/NZD     

The Aussie and Kiwi both eased off best levels within 0.6377-20 and 0.5950-07 respective ranges against the Greenback, but kept necks ahead of the chasing G10 pack as the former gleaned independent impetus from trade data showing a wider than forecast surplus boosted by a strong rebound in exports that in turn was driven by higher iron ore, minerals and a near 100% increase in non-monetary Gold.

JPY/EUR/CHF

Fix demand and exporter supply underpinned the Yen on the way from sub-149.00 to 148.27, and before the aforementioned upturn in yields, while the Euro just retained 1.0500+ status with 1.3 bn option expiries at the round number emitting magnetic impulses, but also offering Eur/Usd support. Elsewhere, the Franc straddled 0.9150 in the absence of anything Swiss centric.

GBP/CAD

The Pound was flagging even before a more contractionary than feared UK construction PMI and did not get any comfort from HSBC upgrading its 2023 GDP estimate to 0.5% from 0.2% or an uptick in year ahead inflation expectations as per the BoE’s September DMP. Instead, Cable remained capped by the 10 DMA and retreated towards 1.2100 in contrast to the Eur/Gbp cross bouncing above 0.8650. Meanwhile, the Loonie suffered more crude contagion as Usd/Cad climbed from 1.3711 to 1.3780 in advance of Canadian trade data and PMIs.

SCANDI/EM

Little respite for the Nok as Brent resumed its slide after a brief reprieve and the Mxn was undermined by the downturn in WTI, but the Krw underpinned following stronger than consensus SK CPI and the Finance Minister pledging to take measures to stabilise the FX market if needed. Conversely, the Zar fell further in sympathy with SARB Governor Kganyago’s concern about inflation and the exchange rate that is not a variable the central bank controls and a worry over the extent that it ends up feeding into inflation.

05 Oct 2023 - 10:16- ForexData- Source: Newsquawk