EUROPEAN FX UPDATE: Pound loses more ground and Euro still precarious

Analysis details (10:04)

DXY/GBP/EUR

The Dollar maintained a firm underlying bid on the back of the US services ISM that beat consensus across the board, but also due to ongoing weakness or underperformance in other currencies that kept the index afloat within a tight range just below 105.000 (104.980-800 to be precise). Sterling succumbed to deeper losses, partly in wake of much weaker than forecast Halifax house prices and on further fallout from yesterday’s BoE testimony to the TSC when Governor Bailey told the Committee that the MPC is approaching the end of road in terms of rate hikes. Cable relinquished 1.2500+ status before losing Fib support at 1.2479 and the Eur/Gbp cross climbed from around 0.8574 towards 0.8600 even though the Euro retested support into 1.0700 against the Greenback. Eur/Usd had decent option expiry interest to lean on as 1.85 bn rolled off at the strike, while market contacts also flagged the prospect of ‘no touch’ expiries being staunchly defended given the fact that the round number has held since Tuesday. However, the headline pair remained technically bearish ahead of a slew of ECB and Fed speakers plus US jobless claims, Q2 unit labour cost and productivity revisions. Back to the Pound, and it faced more downside pressure via a marked decline in 1 year CPI expectations in the latest DMP.

NZD/JPY/AUD

An encouraging recovery in NZ manufacturing sales gave the Kiwi a boost, while the Yen rebounded from a marginal new low vs the Buck as Treasury yields eased off post-ISM peaks and the Aussie appeared to take some positives from less weak than expected Chinese imports rather than negatives from a narrower than forecast Australian trade surplus. Nzd/Usd regained poise between 0.5863-89 parameters, Usd/Jpy pared back from 147.89 to 147.37 and Aud/Usd was underpinned within 0.6363-93 bounds.

CAD/CHF

The Loonie settled down after its post-BoC/US ISM reverberations, with Usd/Cad relatively steady around 1.3645 awaiting Canadian building permits, Ivey PMIs and a speech from BoC Governor Macklem, while the Franc hovered just beneath 0.8900 following marginally mixed Swiss jobless rates and another monthly fall in FX reserves.

EM     

Although Chinese exports also defied consensus looking for a steeper decline, the Cny and Cnh failed to benefit amidst overall concerns about the economy and heightened friction with the US, while the Pln continued to reel after the NBP’s decision to slash rates three times more than widely anticipated and before Governor delivers a post-meeting press conference to explain the rationale.

07 Sep 2023 - 10:04- Fixed IncomeData- Source: Newsquawk