EUROPEAN FX UPDATE: Greenback retreats to the benefit of most bar the Yen

Analysis details (09:32)

DXY/GBP/EUR/JPY

The Dollar was already off best levels before the latest pick-up in broad risk sentiment, partly due to China cutting stamp duty on stock trades by 50% to support shares and came under more pressure when the PBoC continued its efforts to boost the Yuan via extremely low Usd/Cny midpoint fixes. However, the Buck also conceded ground as the Jackson Hole event progressed and the spotlight shifted from Fed Chair Powell to other Central Bankers, including hawkish-leaning ECB members, like Kazaks and Holzmann that erred on the side of tighter policy, plus BoE’s Broadbent who warned that rates may have to remain restrictive for some time yet. The index retreated further from Friday’s fleeting 104.440 peak within a lower 104.180-103.970 range, albeit retaining an underlying bid ahead of spot month end when the rebalancing signal is strong according to Barclays. Moreover, the DXY and Greenback in general were underpinned by ongoing underperformance in the Yen following remarks from BoJ Governor Ueda highlighting that underlying inflation is still below 2% and a reason to maintain the current ultra-easy stance. The Pound pivoted 1.2600 in light UK holiday activity, Eur/Usd reclaimed 1.0800+ status between decent option expiry interest extending from 1.0795 through 1.0840-50 to 1.0900, with little reaction to weak Eurozone M3 metrics, while Usd/Jpy straddled 146.50 where 1 bn option expiries were due to roll off at the NY cut and just shy of a virtual twin peak (circa 146.62).

CHF/AUD

Another decline in Swiss weekly sight deposits was largely shrugged off as Usd/Chf held relatively steady within 0.8852-19 confines, but Aud/Usd lost momentum between 0.6439-06 bounds in line with rebounds in Usd/Cny and Usd/Cnh, irrespective of firmer than forecast final Aussie retail sales and could have been wary of expiry interest at 0.6410 and 0.6420-30 (especially the former given hefty size, at 2.4 bn vs 1.6 bn respectively).

CAD/NZD

The Loonie loitered from 1.3584 to 1.3604 and the Kiwi lagged down under mainly in the face of Aud/Nzd headwinds, though also perhaps on some jitters about a potential RBNZ overhaul as NZ’s opposition party vowed to shake up the Central Bank and is leading in the polls. Nzd/Usd faded from 0.5928 to 0.5896 and the cross climbed from 1.0843 to 1.0869.

SCANDI/EM

No retail therapy for the Nok as Norwegian consumption recoiled markedly in July, while the Sek was on the defensive before a speech by Riksbank Deputy Governor Floden. Conversely, the Try derived some traction from the CBRT reiterating its intention to implement a roadmap for the start of disinflation next year via gradual and decisive steps.

28 Aug 2023 - 09:32- Fixed IncomeEconomic Commentary- Source: Newsquawk