EUROPEAN FX UPDATE: Ramsden moves Sterling and DXY drifts lower on an otherwise quiet morning

DXY

The index adopted a mild downside bias following early side-ways trade amid summer conditions, a lack of drivers, and ahead of the US CPI metric on Wednesday. DXY resides under yesterday’s 106.37 close, with some brief support found at its 10 DMA (106.17) ahead of 106.00, whilst the 21 DMA is seen at 106.78 - yesterday’s range is printed between 106.09-106.81. “Expect another range-bound day”, says ING. Given the holiday trading condition, participants may want to give greater attention to option expiries which could see FX gravitate toward strikes heading into the NY cut, in the absence of catalysts – see the full list here.

GBP, EUR

A choppy session thus far for Sterling, relative to G10 peers, with early gains in the currency trimmed following dovish vibes from BoE Deputy Governor Ramsden who stated that a 2023 rate cut is a possible scenario but is not his forecast, whilst the BoE could be in a situation of cutting rates and selling assets at the same time. However, Ramsden also said it is more likely than not that the BoE will need to hike further. Nonetheless, GBP/USD pulled back from the 1.2094 peak at the time and towards the mid-range, but has since had another run at 1.2100 to the upside. EUR/GBP benefitted from the quote currency’s modest pullback, which lifted the cross towards the upper end of its current 0.8430-53 intraday range. EUR/USD sees support from the modestly softer Dollar and topped yesterday’s 1.0221 high at the time of writing, with Friday’s peak seen at 1.0252. In terms of notable near-the-money OpEx, EUR/USD sees EUR 1.7bln between 1.0200-1.0210, with a further EUR 1.7bln seen just below between 1.01085-90.

AUD, NZD, CAD

All modestly softer/flat vs the Dollar after the outperformance seen yesterday. AUDUSD failed to breach 0.7000 to the upside and drifted lower from its 0.6993 peak, with the 50 DMA residing at 0.6944 today. NZD/USD trades around its 50 and 10 DMAs at 0.6277 and 0.6279 respectively, whilst the AUD/NZD cross is flat and just above 1.1100. USD/CAD is flat above 1.2850, with USD 1.2bln in OpEx seen at strike 1.2900.

JPY

Again, a relatively flat session so far, but USD/JPY found some resistance by its 50 DMA (135.14) early in the session and trades on either side of 135 awaiting the next catalyst. In terms of OpEx, USD/JPY sees almost USD 1bln between 135-135.05 alongside USD 1.4bln between 135.30-40.

HUF

EUR/HUF saw a delayed reaction to the hotter-than-expected CPI and Core CPI July prints, with the NBH also acknowledging that household inflation expectations further rose from June levels. EUR/HUF fell from its intraday peak at 395.63 to 393.64 over the course of around an hour.

09 Aug 2022 - 09:23- Research Sheet- Source: Newsquawk