EUROPEAN FX UPDATE: Greenback gyrates, Aussie outperforms and Euro awaits

Analysis details (10:07)

DXY

The Dollar settled down after Wednesday’s whiplash on the back of firmer than forecast headline US CPI data that was largely discounted due to the effect of higher energy prices. However, it encountered more intervention and faced headwinds from certain rivals that were underpinned by supportive macro fundamentals or ongoing strength in underlying commodities, like crude oil. Moreover, further event risk loomed in the form of the ECB policy meeting and impact on the Euro via the index as its major component, plus often volatile US retail sales, jobless claims, producer prices and business inventories. Hence, the DXY remained relatively restrained within 104.550-760 confines inside the prior session’s 104.510-980 range.

AUD/JPY  

Resistance around 0.6450 continued to hamper the Aussie against the Buck, but it held comfortably above 0.6400 in wake of the latest labour market report that revealed a much bigger than expected rise in employment, albeit almost all due to part-time jobs, a rise in the participation rate and steady unemployment. Conversely, the Yen managed hold off yesterday’s knee-jerk lows vs the Greenback between 147.45-03 parameters irrespective of Japanese machinery orders missing consensus, and perhaps drawing some encouragement from new Economy Minister Shindo pledging to mobilise all possible policy measures to support the economy and consider bold initiatives to ease the pain of price hikes. 

CAD/NZD/EUR

All marginally firmer against their US peer, as the Loonie gleaned more impetus from WTI within 1.3555-27 bounds in the run up to Canadian wholesale trade, the Kiwi tagged along with the Aussie, but on the 0.5900 handle pre-NZ manufacturing PMI and the Euro held comfortably above 1.0700 in eager anticipation of the ECB. On that note, market pricing was skewed towards another 25 bp hike, but the analyst community was far from convinced as we highlight in the preview available via the Headline Feed at 9.15BST. 

CHF/GBP

The Franc lagged sub-0.8900 vs the Dollar and possibly undermined by softer than previous Swiss producer and import prices, while the Pound failed to stay above 1.2500 following a slump in the RICS UK house price balance to the lowest level since 2009, but Cable may have been cushioned by hefty option expiry interest at the 1.2475 strike (1.05 bn).

SCANDI/EM

Softer than forecast Swedish inflation metrics kept the Sek under pressure, but the Nok was buttressed by Brent to the extent that it was able to withstand a Norges Bank regional network survey entitled ‘Prospects for weak growth’ based on the fact that contacts see growth slowing into the winter months. Elsewhere, China, Turkey and Poland doubled down on efforts to support the Cny/Cnh, Try and Pln respectively as the PBoC asked some banks to hold off on immediate Usd purchases in the interbank market to square FX positions and keep such exposure until the net sum hits a certain level, the CBRT introduced a 25% reserve requirement for FX-protected Lira deposits with maturities of up to 6 months that will likely lead to a Try 250-300 bn liquidity drain, and Poland’s Deputy Finance Minister claimed that there is no reason for the Pln to weaken.

14 Sep 2023 - 10:07- Research Sheet- Source: Newsquawk