EUROPEAN FX UPDATE: Sterling and Euro outpace G10 peers, DXY dips under 102.00, and the Aussie lags post-RBA

Analysis details (09:10)

DXY

A soft morning for the Dollar and index following yesterday’s ISM-induced losses, with the DXY oscillating on either side of the 102.00 mark in early European hours after printing a fresh session low of 101.80 (at the time of writing) just after the cash open. News flow has been light but the EUR and GBP saw what was seemingly a tech-driven bid shortly after the open. From a more Dollar-specific point, today’s session sees a trio of Fed speakers including Cook (Voter), Collins (non-Voter) and Mester (2024 voter). On the data front, traders may be eyeing the Jolts Jobs Opening in the absence of other catalysts – analysts at ING suggest a “sharp decline here would probably be read as a mildly bearish dollar factor - adding support to the 2H23 Fed easing cycle.” From a technical perspective, the DXY moved below yesterday's trough with clean air now seen until 101.54 (3rd February low).

GBP, EUR, CHF

Modest gains were seen across the European majors amid a broader softening of the Dollar. EUR/USD surged above by a double top around 1.0926 to a session high of 1.0937 with no obvious catalysts, while EUR/GBP remains heavy after the daily candle opened under its 100 DMA (0.8780 today). GBP/USD leads the gains as it topped 1.2450 with participants noting the volatile move was likely triggered by stops. The pair thus far trades in a 1.2396-2474 intraday parameter ahead of BoE’s Tenreyro and Chief Economist Pill at 10:15BST and 15:30BST respectively, with the latter scheduled to speak on inflation and monetary policy. Analysts at ING say “Should Huw Pill choose to play up the welcome signs of easing constraints in the UK labour market, expectations of future BoE tightening may dwindle, and sterling should weaken. For that reason, we are reluctant to call for an early GBP/USD break above 1.25 and equally we think EUR/GBP should stay supported ahead of 0.8750. We continue to target 0.90 later this year for EUR/GBP”. USD/CHF sees modest pressure and trades closer to the bottom of a 0.9101-43 range.

CAD, NZD, AUD, JPY

The Loonie and Kiwi both modestly outperformed in APAC hours, with the former underpinned by the OPEC-supported crude prices, whilst the latter initially benefitted ahead of the RBNZ as the AUD extends on losses post-RBA and currently stands as the G10 laggard. AUD/USD briefly dipped under its 200 DMA (0.6749) and resides towards the bottom of a 0.6743-93 range whilst the AUD/NZD retreated under 1.0750 and the 21 DMA (1.0732) – in turn cushioning the NZD. To recap, the RBA kept the Cash Rate Target unchanged at 3.60%, as expected, but the Board said it expects that some further tightening of monetary policy may well be needed with today's decision to allow additional time to assess the impact of policy thus far. The RBA said it remains resolute in its determination to return inflation to target and will do what is necessary to achieve that. The JPY trades with modest losses as USD/JPY encountered some resistance near the 50 DMA (133.03) and the 133.00 psychological bounce after touted early APAC demand waned – a bounce in the pair overnight was partly pinned on Japanese importer demand.

04 Apr 2023 - 09:10- Research Sheet- Source: Newsquawk