EUROPEAN FX UPDATE: high betas beat hastier retreat, while Dollar retains bid tone

Analysis details (10:02)

DXY/JPY/EUR/CHF/CAD/GBP

The Buck continued to derive bullish momentum via further bear-steepening in US Treasuries allied to safe haven demand due to the ongoing Gaza conflict and the index extended gains marginally to post a new weekly peak at 106.670 before fading as the Euro found some technical support and the Yen managed to defend the psychological 150.00 level yet again. Eur/Usd stalled just above a rising trendline at 1.0521 after peaking just shy of 1.0550 and Usd/Jpy drifted back down from an effective double top around 149.93 to 149.67 inside almost equal size option expiry interest at the round number and between 149.50-45. However, the DXY was underpinned by weakness elsewhere in the basket and the Greenback generally by underperformance beyond. Indeed, the Franc failed to glean extra impetus from a wider Swiss trade surplus, the Loonie was undermined by a downturn in crude and Sterling could take advantage of Gilt/UST convergence on grounds of UK/US economic divergence. Usd/Chf hovered beneath 0.9000, Usd/Cad was propped on the 1.3700 handle and Cable slipped towards 1.2100 and a series of recent lows having petered ahead of 1.2150.

AUD/NZD

Risk aversion weighed on the Aussie and Kiwi, while the former also had to digest mixed labour market metrics as headline payrolls missed consensus and would have been markedly negative without a gain in part-time employment, while a dip in the jobless rate came alongside a lower participation rate. Aud/Usd retreated from 0.6339 to 0.6297 and Nzd/Usd from 0.5858 to 0.5819 in the run up to NZ trade data.

SCANDI/EM   

The Sek and Nok were also hit by souring sentiment, and to the extent that the latter hardly had time to appreciate an improvement in Norwegian industrial confidence, or less pessimism to be precise. Elsewhere, EM currencies suffered heavier losses and this prompted the BI to hike rates by 25 bp against consensus for no change in an effort to stem the Idr tide, while the Inr needed more RBI intervention and the Cny/Cnh another hugely suppressed PBoC fix to avoid more pronounced depreciation, but the Myr plunged to all time lows irrespective of Malaysian retail sales beating consensus convincingly and coming with a back month upgrade and the Krw was left to market forces after the BoK stood pat as expected.

19 Oct 2023 - 10:02- Research Sheet- Source: Newsquawk