EUROPEAN FX UPDATE: relative yield premiums help Buck regain poise

Analysis details (10:03)

DXY/EUR/JPY

The Greenback succumbed to more downside in wake of Wednesday’s weaker than forecast US PMIs, with the Dollar index retreating further from 103.980 peak to 103.270 trough before finding a base and gleaning traction from wider differentials between Treasuries and their global bond peers. Technical impulses also impacted as the DXY bounced to 103.520, while the Buck clawed back losses beyond the basket in consolidative trade ahead of jobless claims, durable goods and speeches from Fed’s Harker and Collins on the opening day of the Jackson Hole symposium. Meanwhile, the likes of the Euro and Yen were wary of more hefty option expiry interest covering extensive ranges from 1.0800 to 1.0950 and 144.40 to 146.00 in Eur/Usd and Usd/Jpy respectively - see 6.53BST post on the Headline Feed for specific strikes and sizes. Eur/Usd faded at 1.0876 and drifted down towards 1.0850, while Usd/Jpy bounced from 144.61 to 145.35.

NZD/AUD

Corrective price action and retracement rather than anything new in terms of fundamental factors seemed to weigh on the Kiwi and Aussie, as Nzd/Usd pulled back from 0.5981 to probe 0.5950 and Aud/Usd stalled between 0.6488-57 parameters. However, the Aud/Nzd cross was elevated or underpinned around 1.0850 amidst ongoing strength in base and precious metals, another upturn in the Yuan and a breakthrough in the Woodside Energy dispute.

CAD/GBP/CHF

The Loonie, Sterling and Franc largely meandered awaiting further direction, with Usd/Cad, Cable and Usd/Chf all restrained within 1.3541-11, 1.2730-1.2692 and 0.8798-61 respective confines, though the Pound could get some independent impetus via UK CBI distributive trades.

SCANDI/EM

Some payback for the Sek and Nok after notching recovery gains vs the Eur of late and the latter was hampered by Brent losing its mojo, but the Cny and Cnh remained on a firmer footing following the latest supportive PBoC fixing and the Inr continued to appreciate the RBI’s NDF intervention supplement. Elsewhere, the Try proceeded cautiously pre-CBRT with hike expectations typically wide and the Zar underperformed irrespective of Gold fastening its grasp of the Usd 1900/oz handle or the BRICS Summit in SA concluding with invites to Iran, Egypt, Argentina, Ethiopia, Saudi Arabia and UAE for prospective membership from 1st Jan 2024.

24 Aug 2023 - 10:03- Fixed IncomeResearch Sheet- Source: Newsquawk