EUROPEAN FX UPDATE: Sterling bulls back in the hunt and high betas bounce

Analysis details (09:58)

GBP/AUD/NZD

The Pound regained some poise after Friday’s fallout amidst high drama in Westminster where UK PM Truss sacked the Chancellor and replaced him with a new man pledging to restore order and stability in the financial markets with a more frugal brand of fiscal policy. Cable bounced further from circa 1.1150 to probe 1.1300 at best before fading and Eur/Gbp retreated to test bids/underlying support beneath 0.8650 and the 50 DMA that comes in at 0.8646 today awaiting a statement from Hunt due around 11 am and expected to bring forward parts of the medium term fiscal plan with more tax cut proposals from the mini budget removed. Elsewhere, the Aussie and Kiwi both took advantage of less risk aversion and their US peer’s loss of traction, partly at the hands of Sterling, as Aud/Usd rebounded from 0.6200 or so to just over 0.6250 and Nzd/Usd from roughly 0.5550 to a few pips north of 0.5600.

DXY/CHF/CAD/EUR

As noted above, the Buck pared gains against the Pound and others benefited in kind, with the index easing back into a tighter 113.200-112.840 range having eyed resistance into 113.500 ahead of the weekend and now looking toward October’s NY manufacturing index for some independent direction. Meanwhile, the Franc recovered from sub-1.0050 lows to revisit parity, the Loonie from nearer 1.3900 to almost 1.3800 pre-comments from BoC’s Rogers and the Euro from 0.9720 to top 0.9750 with some impetus via reports that ECB chief economist Lane is seen proposing another 75 bp hike at the upcoming October policy meeting.

JPY

Levels of Japanese verbal intervention ratcheted up several notches after the Yen got close to 149.00 vs the Dollar, but Finance Minister Suzuki refrained from responding to a question about whether there has been any stealthy physical action since September 22 when the MoF and BoJ did step in. Hence, Usd/Jpy remained elevated or at least underpinned between 148.42-80 parameters irrespective of a Kyodo piece suggesting that the BoJ will raise its FY 2022/23 inflation forecast to the high 2% area from 2.3% at present.

SCANDI/EM  

The Nok got a boost from a wider Norwegian trade surplus and the Czk outperformed its CEE peers after firmer than expected Czech PPI metrics, while the Cnh and Cny were cushioned by another relatively strong PBoC midpoint fix and reports that Chinese state banks sold Dollar/Yuan forwards in keeping with their Indian counterparts under direction of the RBI. Conversely, more bad news for the Try in the form of a sharp swing in Turkey’s budget balance from small surplus to big deficit.

17 Oct 2022 - 09:58- Fixed IncomeData- Source: Newsquawk