EUROPEAN FX UPDATE: RBA helps Aussie repel Buck revival

Analysis details (10:02)

DXY/JPY/AUD

Another fade from recovery high for the Dollar and index, but not before that latter touched 105.500 vs Monday’s 105.400 post-US services ISM peak and almost tested 7.0000 against both the onshore and offshore Yuan again. A retreat in Treasury yields sapped some momentum from the Greenback and gave the Yen a boost, while the Aussie derived impetus from the latest RBA hike overnight and guidance for further tightening on the grounds that inflation remains too high. Usd/Jpy reversed from circa 137.45 to sub-136.50 and Aud/Usd rebounded from just shy of 0.6700 to 0.6738, irrespective of mixed Japanese and Aussie data, including an unexpected swing in Australia’s Q3 current account balance from healthy surplus to deficit, and BoJ Governor Kuroda reiterating that the benefits of current monetary policy outweigh the costs and the Bank will continue QQE to ensure companies can smoothly raise wages.

NZD/EUR/GBP/CHF

All narrowly mixed against the Buck after handing back gains in wake of a surprisingly strong US non-manufacturing ISM and with the Kiwi also facing more Aud/Nzd cross headwinds post-RBA. Nzd/Usd waned from a fraction over 0.6350 towards 0.6300, while the Euro lost grip of the 1.0500 handle, Sterling relinquished 1.2200+ status even before a steeper than forecast deceleration in the UK construction PMI, and the Franc ran into resistance ahead of 0.9400 before dipping under 0.9450.

CAD/NOK

The Loonie was undermined by softer oil prices in advance of Canadian trade that highlights on the eve of the BoC, as Usd/Cad topped 1.3600 compared to lows around 1.3570, while the Norwegian Crown had a downbeat Norges Bank regional network survey to contend with on top of the weakness in Brent, with Eur/Nok elevated between 10.3950-10.4435 parameters.

SEK/EM

Marginal outperformance in the Swedish Krona vs its Scandinavian peer probably due to less correlation with crude, but the SA Rand was clearly boosted by Q3 GDP surpassing consensus by some distance rather than Gold consolidating off recent peaks. Conversely, the Renminbi failed to sustain recovery momentum amidst reports that the latest RRR cut could push China’s 5 year LPR down later in December and the Czech Koruna was hampered by a deeper decline in retail sales.

06 Dec 2022 - 10:02- Fixed IncomeData- Source: Newsquawk