EUROPEAN FX UPDATE: Greenback grinds even higher and Aussie underperforms

Analysis details (10:05)

DXY/EUR

The Buck extended gains on the back of last Friday’s mostly upbeat BLS report that augmented 75 bp Fed rate hike expectations for November, but not before a pullback in light holiday-impacted trade and perhaps some profit taking when 113.000 in the Dollar index offered some resistance. However, the psychological level was subsequently breached between 112.610-113.310 parameters amidst an escalation of conflict between Russia and Ukraine and US Treasury yield convergence against EGBs that compounded war and energy supply-related pressure on the Euro as the largest component of the basket. Indeed, Eur/Usd tested 0.9700 to the downside from a high just over 0.9750 and retreated further from decent option expiry interest spanning 0.9800-55 (2.84 bn in total to be precise) in the process, and with little bounce seen on hawkish remarks from ECB’s Knot.

AUD/NZD

Euro travails aside, it was the Aussie that actually propped up the G10 table after a triple whammy of blows, as AIG’s services index fell below 50.0 along with China’s Caixin equivalent and composite PMIs. Aud/Usd teetered over 0.6300 and the Aud/Nzd cross reversed sharply from 1.1350+ to sub-1.1300 even though the Kiwi also lost ground against its US rival and the 0.5600 handle ahead of NZ electronic card retail sales data.

CHF/GBP/CAD/JPY

All softer vs their US counterpart, albeit to varying degrees as the Franc slipped towards parity irrespective of a decline in Eur/Chf and Swiss sight deposits showing a marked drop on domestic bank balances, while Cable failed to sustain momentum above 1.1100 before losing Fib support at 1.1058 and 1.1050, the Loonie weakened within a 1.3716-62 range and Yen rotated either side of 145.50 on a long Japanese weekend due to Sports Day.

SCANDI/EM

The Sek could not take advantage of the Eur’s aforementioned frailty, but the Nok gleaned some traction via much stronger than forecast Norwegian headline and core inflation. Elsewhere, mostly losses vs the generally strong Usd with the Cnh and Cny also undermined by contractionary Chinese PMIs plus US export controls on semiconductor chips. The Try only derived minor support via a drop in Turkey’s unemployment rate, the Zar fell in tandem with Gold towards the 21 DMA and the Huf slumped to a fresh all time low vs the Eur on a combination of all too familiar negative issues afflicting Hungary.

10 Oct 2022 - 10:05- Fixed IncomeData- Source: Newquawk