EUROPEAN FX UPDATE: Greenback grinds higher, while expiries keep Euro grounded

Analysis details (10:26)

DXY/EUR

Another change in direction for the Buck that was blown off course by a bleak Chicago PMI on Wednesday before bouncing firmly when JOLTS job openings defied consensus with a jump to 10 mn+ and then retreated again as two current FOMC voters signalled a preference for holding rates steady in June. However, Fed’s Jefferson and Harker both framed the potential break from tightening as skip rather than pause, and the Dollar index regained upward momentum after holding above 104.000 between 104.150-500 parameters amidst a further rebound in US Treasury yields from pre-month end lows and the ongoing underperformance of various currency counterparts. On that note, the Euro failed to derive any traction from mixed Eurozone data (German retail sales) and manufacturing PMIs or latest ECB comments underlining that the heavy lifting may have been done in terms of normalising policy, but there is more work to be done. Moreover, Eur/Usd remained heavy under the psychological 1.0700 level where 2.5 bn option expiry interest sat and extended through 2.61 bn at 1.0725-35 (2.61 bn), 1.1 bn at 1.0770 to 1.3 bn at 1.0800-10. Note, there was little reaction to preliminary EZ inflation metrics that were cooler than forecast, though in line with the bias from most national reports.  

JPY/NZD

The Yen continued to dovetail with its US peer and retreated sharply towards 140.00 from just over 139.00 irrespective of Japanese company profits improving markedly and business capex exceeding expectations two-fold overnight. Instead, Usd/Jpy rebounded in tandem with diverging UST-JGB spreads and a revival in overall risk sentiment, but the Kiwi failed to benefit from the latter as Aud/Nzd headwinds kept Nzd/Usd battened down towards the base of a 0.5991-0.6028 range ahead of NZ terms of trade, import and export prices.

GBP/CAD/AUD/CHF

All relatively rangy against the Greenback, with Sterling retaining 1.2400+ status (just) in wake of a raft of UK releases including conflicting Nationwide house prices, a minor upward revision to the final manufacturing PMI, weak mortgage lending and approvals vs strong consumer credit, and the latest BoE DMP survey findings showing an upturn in CPI expectations even before April’s hotter than anticipated readings. Elsewhere, the Loonie held a tight line between 1.3585-61 in advance of Canada’s manufacturing PMI, the Aussie regained some poise around 0.6500 with the aid of upbeat capex and China’s Caixin manufacturing PMI returning to expansion, and the Franc straddled 0.9100 regardless of a narrower Swiss trade surplus and weaker than expected manufacturing PMI.

SCANDI/EM

No joy for the Sek or Nok as Swedish and Norwegian manufacturing PMIs deteriorated, while the Riksbank’s FSR flagged heightened risks to the system and several vulnerabilities that are now posing challenges, namely highly indebted property companies and banks’ large exposure to the sector. Meanwhile, the Cny and Cnh only got fleeting relief from the aforementioned upbeat Caixin PMI as angst between China and the US cranked up over Taiwan.  

01 Jun 2023 - 10:25- Fixed IncomeData- Source: Newsquawk