EUROPEAN FX UPDATE: markets monitoring Middle East developments, mostly

Analysis details (10:12)

DXY/JPY/CHF/XAU

The Dollar lost a bit more of its post-US CPI momentum, but remained underpinned and largely within recent loftier ranges as the index pivoted 106.500 tightly. In fact, the Buck clawed back some of Friday’s declines vs safer havens such as the Franc, Yen and Gold given a rebound in Treasury yields and no major escalation of the conflict between Israel and Hamas over the weekend in terms of drawing in nearby nations. Usd/Chf climbed back above 0.9000 towards 0.9050, Usd/Jpy straddled 149.50 and Xau/Usd drifted down from circa Usd 1935/oz to just under Usd 1910/oz. However, tensions were further strained by statements of intent from the Israeli military whose goal is to completely destroy the governing and military capabilities of Hamas and other terrorist organisations, and a warning from Iran’s Foreign Minister that If the Zionist aggressions do not stop, the hands of all parties in the region are on the trigger and heavy losses will be inflicted on the US if the scope of the Gaza war widens. Geopolitics aside, the NY Fed manufacturing survey and comments from Fed’s Harker provided the fundamental focus for the Greenback.

NZD/AUD

Pre-NZ election jitters turned into outperformance for the Kiwi, as the country’s political preference shifted to the right in a rejection of the Labour Party and PM Hipkins conceded defeat, while National Party leader Luxon is set to become the next PM. Nzd/Usd reclaimed 0.5900+ status and the Aud/Nzd cross retreated from just under 1.0700 to 1.0659 before the Aussie latched on to its Antipodean peer’s coattails and regained a firmer grasp of the 0.6300 handle.

EUR/GBP/CAD

The Euro consolidated above 1.0500 and sub-1.0550 against its US rival flanked by hefty option expiry interest at the round number and between 1.0540-50 (1.1 bn and 1.7 bn respectively), while Sterling swivelled either side of 1.2150 without much independent impetus from BoE’s Pill. In short, he echoed Governor Bailey when stating that there is still work to get back to the 2% inflation target sustainably and added that not all wage indicators are currently pointing the same way, with average weekly earnings increasingly looking like an outlier. Elsewhere, the Loonie meandered around 1.3650 in advance of Canadian manufacturing sales, wholesale trade and the BoC’s business outlook for future sales survey.

SCAND/EM

A narrower Norwegian trade surplus and uncertainty ahead of the PM’s cabinet reshuffle may have hampered the Nok, while the Cny and Cny were undermined by Chinese stock jitters to the extent that they could not take positives from the latest skewed PBoC reference rate, Yuan 289 bn net liquidity injection via an unchanged 2.5% one year MLF op or the Central Bank contending that the number of bright spots in the economy is increasing and China will pay more attention to the balance between economic growth and sustainability, while focusing on expanding domestic demand, boosting confidence and accelerating the virtuous circle of the economy. Meanwhile, the Inr needed more RBI support after much weaker than forecast Indian WPI, the Try was hit by Turkey’s budget balance swinging from surplus to more than double the size of deficit and the Czk was soft in wake of below consensus Czech PPI metrics. Conversely, the Pln was very pleased with Poland’s election outcome as exit polls showed the ruling nationalists with 36.8% of the vote and the largest opposition group Civic Coalition receiving 31.6%, giving PM Morawiecki’s PiS party first stab at trying to form a coalition Government.

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