EUROPEAN FX UPDATE: many majors mired in mega expiries pre and post-payrolls

Analysis details (10:12)

DXY/JPY

A relatively sparse agenda in the run up to NFP left currency markets looking at the usual combination of factors for direction, including overall risk sentiment, rates from an outright, curve and spread perspective, crude prices and short term technical levels. However, the list of large option expiries was abnormally long and comprised some huge interest across an array of strikes to keep several pairs occupied and contained. In Usd/Jpy, 2.5 bn between 149.35-50 provided a cap, or floor for the Yen within a 148.36-99 range and vice-versa for the Dollar index that meandered from 106.550 to 106.340 after Thursday’s deeper retracement to 106.320 from 106.860 awaiting the US jobs report for further impetus ahead of the NY cut.

GBP/CAD/EUR        

All marginally firmer against the Greenback, but rangy as the Pound perked up enough to probe 1.2200 and decent expiry interest at the round number before a slightly larger 1 bn at 1.2225, the Loonie clawed back some losses from sub-1.3700 lows with the aid of stability in oil and the Euro secured a firmer grasp of the 1.0500 handle having closed bullishly above the 10 DMA yesterday. Nevertheless, Eur/Usd faced obstacles on a firmer breach of 1.0550 given 2.7 bn expiries at 1.0550-60 and 1.2 bn at 1.0575-80, while Usd/Cad was likely to be underpinned by 1.5 bn at 1.3625 if Canada's LFS came in considerably stronger than the aforementioned US’ BLS.

CHF/NZD/AUD

The Franc failed to glean much from latest Swiss unemployment metrics as the SA rate came as expected and NSA unchanged from the previous month, though Usd/Chf remained compressed inside 0.9146-17 confines, while the Kiwi and Aussie were underpinned by a pick-up in broad risk appetite rather than specifics. Nzd/Usd and Aud/Usd hovered above 0.5950 and 0.6350 respectively with the latter eyeing option expiries between 0.6380-85 in 1.3 bn and a massive 4.3 bn from 0.6390 to 0.6400.

SCANDI/EM

Norwegian manufacturing output rebounded firmly, but the Nok remained wary about further weakness in Brent and the Czk was hampered by weaker Czech retail sales and CNB minutes highlighting that a large part of the debate was devoted to starting the process of lowering monetary policy rates and the pace, while noting that Koruna depreciation over the past month had delivered easing of roughly 25-50 bp. Elsewhere, the Inr held ground following the anticipated RBI hold and remarks from Chief Das noting that FX reserves are sizable and comfortable.

06 Oct 2023 - 10:12- Fixed IncomeData- Source: Newsquawk