EUROPEAN FX UPDATE: hawkish RBNZ hold revives Kiwi, sticky core CPI propels Pound

Analysis details (10:08)

NZD/AUD

The RBNZ maintained rates as almost unanimously expected, but tweaks to the OCR path gave the flagging Kiwi a lift as Nzd/Usd rebounded from 0.5932 to 0.5993 and the Aud/Nzd cross retreated towards 1.0800 from 1.0851. In short, the Bank reinforced the message that rates will need to remain at a restrictive level for the foreseeable future by raising its projection for December next year to 5.5% from 5.3% and thereby implying no easing until 2025, while Governor Orr stated that the RBNZ is very comfortable with where the OCR is at present. All this in contrast to Tuesday’s dovish RBA minutes and the Aussie also had to contend with a decline in the leading index to just below zero. However, Aud/Usd derived traction within a 0.6429-80 range via another downturn in the Greenback and Yuan recovery amidst reports of more Chinese state bank buying.

DXY/GBP/EUR    

Having failed to glean any lasting momentum from all round stronger than expected US retail sales data, the Dollar faded again on a combination of factors. The index narrowly failed to match the prior session high before retreating from 103.270 to 102.940 and back down through the 200 DMA in the process. Conversely, Sterling received a boost from slightly above consensus core UK inflation hot on the heels of the even stronger average earnings relative to expectations and Cable reached 1.2766 as a result, while the Euro consolidated on the 1.0900 handle against the Buck, albeit off yesterday’s 1.0950+ peaks amidst headwings from Eur/Gbp and flanked by more decent size option expiries (1.5 bn at 1.0850 and 1 bn at 1.1000). Note, Eur/Usd took mostly as forecast flash Eurozone Q2 GDP, Employment and even better than feared IP in stride.

CAD/JPY/CHF

All marginally firmer vs the Greenback, but restrained in the absence of anything specific as the Loonie kept tabs on WTI, the Yen continued to watch US Treasury yields with an ear to the ground for further verbal intervention, and the Franc largely meandered against the backdrop of volatile risk sentiment. Usd/Cad pulled back from 1.3510 to 1.3476, Usd/Jpy rotated around 145.50 and Usd/Chf hovered just shy of 0.8800 between 0.8792-75 confines.

SCANDI/EM  

Consolidative trade for the Sek and Nok, with little reaction to a fall in 1 year Swedish money market CPIF expectations or an improvement in Norwegian consumer confidence, while the Cny and Cnh were still reliant on intervention to prevent deeper losses and the Rub maintained its recovery post-emergency CBR tightening with added incentive from latest reports about capital controls -  Russian Authorities may bring back compulsory sale of FX revenues "at any moment" even though part of export revenues are now in Roubles and Rupees, according to a high level source who said the move could be imminent.

16 Aug 2023 - 10:08- Research Sheet- Source: Newsquawk