EUROPEAN FX UPDATE: Kiwi and Yen the major beneficiaries as Buck folds

Analysis details (10:09)

DXY

The Dollar index probed another chart prop as Treasuries bull-flattened on the back of a well received 20 year auction and only just settled at the Fib retracement level before succumbing to further downside pressure within a 103.480-170 range in advance of FOMC minutes that may offer the Greenback some respite. In the interim, relatively minor releases on Tuesday’s agenda including the National Activity Index, Philly Fed Non-manufacturing Business Outlook Survey and Existing Home Sales left the Buck reliant on positioning, some decent option expiries and technical support against peers to avoid more pronounced depreciation.

NZD/JPY

Encouraging NZ trade data and a pick-up in exports that contributed to a narrower deficit, helped propel the Kiwi into a higher plane vs its US and Aussie counterparts, as Nzd/Usd climbed from 0.6030 to 0.6086 and the Aud/Nzd cross retreated through 1.0850. Meanwhile, the Yen scaled yet another big figure against its US rival before running into offers between 148.41-147.16 parameters with momentum emanating from softer UST yields.

GBP/AUD/CHF/EUR/CAD

Sterling formed a base above 1.2500 and mostly beyond the 100 DMA that was ultimately repellent yesterday, with some impetus from hawkish BoE rhetoric ahead of TSC testimony. In short, Governor Bailey underlined the higher for longer rate mantra and warned against complacency over inflation. Similar vibes emanated from RBA minutes overnight and separate comments from Governor Bullock as the former revealed that  staff projections for inflation at the policy meeting assumed one or two more rate hikes and the latter said inflation is a crucial challenge over the next one or two years. Hence, Aud/Usd got close to the 200 DMA at 0.6589 within 0.6586-54 bounds. Elsewhere, the Franc pared losses from just under 0.8850 towards 0.8825 with little adverse reaction smaller Swiss trade surplus, the Euro pivoted 1.0950 and tested a loftier Fib on more than one occasion, but may have been hampered by 1 bn option expiries between 1.0930-25, and the Loonie continued to lag beneath 1.3700 awaiting Canadian inflation data.

EM

The Cny and Cnh extended gains against the Usd following an even stronger PBoC reference rate and reports that some banks have been instructed to bring forward loans intended to be offered in early 2024 to later this year, with the onshore and offshore Yuan both testing 7.1300 (very close to the 200 DMA for the latter). However, Usd/Cnh bounced after subsequent reports that China's major state-owned banks were seen buying Dollars via onshore swaps and selling them in the spot FX market this week.

21 Nov 2023 - 10:09- Fixed IncomeResearch Sheet- Source: Newsquawk