EUROPEAN FX UPDATE: Greenback grinds higher and clips Kiwi’s wings

Analysis details (10:27)

DXY  

Yields rebounded quite firmly from yesterday’s lows and risk sentiment was less buoyant as a result, but the Dollar may also have derived encouragement on technical and psychological grounds given that key or significant levels were approached, tested and even probed before being respected, rejected and defended. Indeed, the index held just above 110.000 again and incrementally over Tuesday’s low to set a slightly firmer base for recovery to 110.820 ahead of the all important non-manufacturing ISM, and ADP pre-Friday’s NFP plus more Fedspeak (Bostic scheduled to make another appearance, and this time on the very topical subject of battling inflation).

GBP/EUR/CAD/CHF   

The Pound gleaned some traction via an unexpected upward tweak to the final UK services PMI to precisely the 50.0 mark, but remained heavy on the 1.1400 handle after Cable fell pips shy of touching 1.1500 in the run up to UK PM Truss at the Conservtive Party Conference. However, Eur/Gbp eased back towards 0.8700 as the Euro faded faster from just as close to parity against the Buck in wake of sub-preliminary or forecast Eurozone PMIs almost all across the board, and Eur/Usd retreated into decent option expiry territory with 1.28 bn rolling off between 0.9935-30 at the NY cut. Elsewhere, the Loonie lost impetus a faction away from 1.3500 as oil prices waned pre-OPEC+ and Usd/Cad awaited Canadian trade data, while the Franc retreated through 0.9800 even though Eur/Chf slipped towards 0.9750 from just under 0.9800 at one stage.

NZD/JPY/AUD    

Well off best levels, but the Kiwi ‘outperformed’ following the 5th half point hike in a row from the RBNZ overnight and the fact that it considered raising the OCR by 75 bp rather than contemplating any less hawkish pivot or dovish tilt, irrespective of the RBA scaling down the pace of tightening yesterday. Nzd/Usd peaked at 0.5805 before a pullback sub-0.5750 and Aud/Nzd bottomed around 1.1249 having been up to circa 1.1360, while Aud/Usd continued to encounter offers above 0.6500 regardless of a firmer rebound in the offshore Yuan through the 21 DMA and not far from 7.0100. Elsewhere, the Yen unwound gains from nearly 143.50 to below 144.50 on debt diversion rather than renewed risk aversion.

SCANDI/EM  

A slowdown in Sweden’s services PMI undermined the Sek, though not as much as the Zar after SA’s headline index fell into contractionary territory and Gold pared back from its highs, but the Pln traded on a more even keel awaiting the NBP and an anticipated 25 bp rate increase.

05 Oct 2022 - 10:27- Fixed IncomeData- Source: Newsquawk