EUROPEAN FX UPDATE: Pound’s round trip leaves Greenback gyrating

Analysis details (10:38)

GBP/DXY/CNY-CNH

Sterling extended its already pretty impressive comeback to breach 1.1200 against the Buck after filling more gaps from Monday’s overnight crash, with follow-through momentum in wake of BoE intervention to prop up debt, primarily, but also the Pound indirectly. Cable still has a bridge or two to cross for complete restoration, or at least repairing the damage done since last week’s mini budget as the high that day stood at 1.1274, while 1.1365 was the peak pre-50 bp MPC hike that left many in the market looking for 75 bp disappointed. Conversely, the Dollar and index retreated further from recent heady heights with other DXY components latching on to Sterling’s stellar recovery efforts, while the Yuan reclaimed more losses from record lows on the back of prospective Chinese state bank buying by order of the PBoC, and the nation’s FX body reportedly ‘asking’ banks to trade spot nearer to the daily onshore reference rate. For reference, the Usd/Cny midpoint fix was set at 7.0998 today and it closed at 7.0924 vs a 7.0845 low, while Usd/Cnh slipped to 7.0845 at one point from a peak of 7.1330 overnight. Back to the Greenback, key US PCE data looms ahead of more Fed speakers and the index is treading water within a 112.220-111.560 range in advance.

AUD/EUR        

The Aussie reclaimed 0.6500+ status against its US rival, irrespective of mixed Chinese PMIs, as risk sentiment improved and the Yuan extended its rebound, as noted above, while the Euro probed 0.9850 vs its US peer, but fell short of technical resistance just above in the form of a Fib retracement level and flip target, even though preliminary Eurozone inflation was stronger than expected.

JPY/CAD/NZD

All narrowly mixed against the Greenback, but still stuck in familiar confines, with the Yen pivoting 144.50 following stronger than forecast Japanese retail sales and industrial production, the Loonie straddling 1.3700 ahead of relatively stale Canadian budget data and the Kiwi hovering above 0.5700 amidst some headwinds from the Aud/Nzd cross.

SCANDI/EM

Some respite for the Sek and Nok, but not before the former tumbled closer towards 11.0000 vs the Eur and the latter gleaned some traction from firmer Brent having approached 10.5500. Elsewhere, the Inr failed to derive momentum via the RBI’s in line half point rate rise, but responded positively to reports that the Central Bank is encouraging state-run refiners to reduce Usd buying in the spot market and urging them to lean on the Usd 9bn credit line instead. Meanwhile, the Zar took a shine to Gold’s rally and firmer base above Usd 1650/oz that opens scope to test a very bullish chart target around Usd 1680 (where the 200 WMA and 21 DMA align).

30 Sep 2022 - 10:38- Fixed IncomeData- Source: Newsquawk