EUROPEAN FX UPDATE: hot inflation data helps Aussie evade Greenback revival

Analysis details (09:40)

AUD/NZD

Aussie bulls were vindicated and perhaps guided by RBA Governor Bullock underscoring that the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation, as Q3 CPI metrics came in stronger than expected in headline, weighted and trimmed terms. This in turn lifted market pricing for the November policy meeting towards 60% for a 25 bp hike and prompted ANZ Bank to revise its forecast for an unchanged rate to a rise from 4.1% to 4.35%. Aud/Usd rallied from circa 0.6350 to 0.6400 in response before running into psychological resistance allied to a bouncing Buck, while Aud/Nzd advanced to 1.0915 and faded as Nzd/Usd managed to hold within a range around 0.5850.

DXY/EUR

The Dollar and index narrowly missed out on a full round trip yesterday, but the latter filled the gap on its way to setting a minor new peak for the week so far, at 106.380 after a rebound from 106.130 amidst marginal re-steepening along the US Treasury curve. However, the DXY eased off best levels when the Euro regained poise on the back of a better than forecast German Ifo survey and less weak than anticipated Eurozone M3 print, albeit loans to household and non-financial institutions slowed further. Eur/Usd popped back above 1.0600 from a 1.0579 low, but faced layered option expiry interest from the round number though 1.0610 (1 bn) to 1.0640-50 (1.1 bn).

JPY/CHF/GBP/CAD

150.00 stood firm as a line in the sand for the Yen against the Greenback, while the Franc contained declines below 0.8950 irrespective of a marked deterioration in Swiss investor sentiment, the Loonie straddled 1.3750 awaiting the BoC to see if it matches consensus for no move in rates and the Pound was undermined by relatively soft UK yields as it pivoted 1.2150.

SCANDI/EM     

The Sek failed to catch a break as it breached support at 11.8000 vs the Eur regardless of a pick-up in Swedish PPI and Riksbank’s Bunge expressing concerns about the potential for prolonged inflation and emphasising that the door to further interest rate hikes is certainly not closed in the run up to remarks from Janssen, while the Try has hampered by a dip in Turkish manufacturing confidence. Conversely, the Cny and Cnh gleaned some traction via latest Chinese stimulus measures and constructive comments from President Xi who said China is willing to manage differences with the US and work together to respond to global challenges in compensation for the first open declaration of Country Garden defaulting on a Usd bond.

25 Oct 2023 - 09:40- Fixed IncomeData- Source: Newsquawk