EUROPEAN FX UPDATE: Greenback grinds to a halt as Treasury yields ease off peaks

Analysis details (10:32)

DXY

The Dollar and index settled down after extending gains on Wednesday when various bullish impulses combined to boost the Buck, including a sharp retreat in USTs to new cycle lows from what appeared to be decent looking recovery highs at one time and possibly peak demand for rebalancing purposes given that yesterday was spot month and quarter end. However, the DXY remained underpinned within a 106.410-750 range having topped out at 106.840 and the Greenback held near best levels against its peers ahead of tier one data and a quartet of Fed speakers. Hence, consolidation rather than any real change of direction, fundamental or technical trend seems to have sapped some of the Dollar’s strength, notwithstanding the fact that the index has spiked almost 400 ticks in just under a month.

AUD/NZD/GBP/CHF

As is often the case, high beta, cyclical and activity currencies bear the brunt when the Buck is flying and then take most advantage of the situation when it lapses or wanes, but the Aussie remained capped below 0.6400 between 0.6380-46 parameters in wake of a downward tweak to final retail sales and the Kiwi fell short of regaining 0.5950+ status following a mixed ANZ business survey showing an encouraging rebound in sentiment vs dip in own activity outlook. Meanwhile, Sterling managed to survive a test of Fib support at 1.2121 with the aid of a sharper rebound in UK yields relative to US and Eurozone as Cable bounced to circa 1.2191 and set sights on hefty option expiry interest at the 1.2200 strike (1.5 bn), and the Franc pared more losses from sub-0.9200.

JPY/EUR/CAD

The Yen regained some poise within a 149.63-22 range and the Euro gleaned some traction if not quite satisfaction from keeping its head afloat of the y-t-d low rather than another slide in EGBs or contrasting Eurozone inflation data from the German states and Spain as Eur/Usd rebounded from 1.0492 to 1.0530. Elsewhere, the Loonie straddled 1.3500 with less support/impetus from oil in advance of Canadian monthly GDP.

SCANDI/EM

Although Brent came off the boil, the Nok retained tech momentum alongside the Sek and perhaps derived some independent incentive via Norwegian sales declining at a slower pace, while the Cny and Cnh got a bigger boost from the PBoC as it set an even more skewed midpoint reference rate and injected a bumper amount of pre-holiday liquidity. 

28 Sep 2023 - 10:32- Fixed IncomeData- Source: Newsquawk