EUROPEAN FX UPDATE: Yen and Yuan bounce as Greenback braces for Fed

Analysis details (10:07)

DXY

The Dollar and index waned again after the latter extended both ends of its w-t-d parameters in what appeared to be a typical turnaround Tuesday, at one stage. To recap, the DXY recoiled from its month end peak to 110.700 before staging a decent recovery to 111.780, but with little real conviction or inclination to take on 112.000 given the looming FOMC. Indeed, the Buck backed off and meandered within a tighter 111.510-120 range awaiting guidance from the Fed beyond the widely anticipated fourth consecutive 75 bp hike. Specifically, any further clues about a potential pivot to less aggressive tightening and hints about adjustments to the peak rate that might be forthcoming in next month’s SEP dot plots will be key for direction. Prior to all that, MBA weekly mortgage applications and ADP provide fillers, and the private payrolls a taster for NFP on Friday.

NZD/JPY/AUD

Another boost for the Kiwi to supplement Aud/Nzd tailwinds, as the Q3 NZ HLFS revealed much stronger than forecast jobs growth and record rise in labour costs to more steady unemployment rate vs consensus for a downtick. Nzd/Usd remained elevated near 0.5900, as the cross drifted down towards 1.0900 and Aussie continued to lag vs its US rival either side of 0.6400 after mixed housing data and another recovery in the Yuan amidst ongoing/unsubstantiated rumours about China reopening from various levels of Covid restrictions. Elsewhere, the Yen also rebounded with impetus from even louder verbal intervention and speculation over actual action, though could not crack resistance at 147.00 against the Greenback.

CHF/CAD/EUR/GBP

All taking advantage of their US peer’s pre-FOMC lapse or drift, as the Franc clawed back from just below par, the Loonie bounced ahead of 1.3650, the Euro stayed close to 0.9900 irrespective of disappointing Eurozone manufacturing PMIs or a downbeat survey from Germany’s DIHK, and Sterling straddled 1.1500 in the absence of anything much UK specific on the eve of the BoE.

SCANDI/EM

Not much solace for the Sek from the Riskbank’s Business Survey noting that while economic activity remains good there are increasing signs that demand is slowing and companies are preparing for a slowdown, while the Huf derived little from what should have been a positive Hungarian manufacturing PMI given that the headline reading reclaimed 50.0+ terrain.

02 Nov 2022 - 10:07- Fixed IncomeData- Source: Newsquawk