EUROPEAN FX UPDATE: Yen and Yuan lead fightback against resurgent Dollar

Analysis details (10:28)

DXY/JPY/CNY-CNH  

The Greenback may have eased off the gas ahead of Fed Chair Powell on a combination of consolidation and profit taking given the extent of gains made in relatively short order and the fact that the index effectively formed a double top around 103.630-620 from 102.190 low on Tuesday. However, reports of pre-weekend positioning in Usd/Jpy and Chinese state bank intervention in Usd/Cny via swaps ensured that the Buck backed off anyway. The Yen probed 138.00 having held a fraction above Thursday’s new 138.75 y-t-d base, while the on-shore Yuan rebounded towards 7.0200 from 7.0600 and its offshore counterpart recovered from circa 7.0750 to around 7.0315. Interestingly, Usd/Jpy did not really bounce in response to latest dovish guidance from BoJ Governor Ueda, though by the same token there was little upside in the headline pair when Japanese inflation metrics picked up pace in line with expectations, bar the super core that narrowly missed, but still rose at the fastest rate since September 1981. Back to the DXY, 103.300 traded in the run up to Fed’s Williams and Bowman who were scheduled to speak before Powell.

NZD/AUD

Having narrowly retained grasp of the 0.6200 handle against its US rival yesterday, the Kiwi got a boost from NZ trade data showing a swing into surplus from deficit as exports gathered momentum in contrast to a slowdown in imports. Nzd/Usd regained momentum and reached 0.6275, while the Aud/Nzd cross drifted down towards 1.0600 even though the Aussie rallied in slipstream and recognition of the aforementioned Yuan revival, with Aud/Usd regaining 0.6650+ status from the low 0.6600 area.

CHF/CAD/EUR/GBP     

Slightly softer yields, firmer oil prices and buoyant risk sentiment all added impetus or incentive for the Franc, loonie, Euro and Sterling to claw back losses vs their US counterpart, as Usd/Chf reversed between 0.9059-20 parameters, Usd/Cad recoiled back below 1.3500 awaiting Canadian retail sales, Eur/Usd climbed from 1.0761 to within five pips of 1.0800 and Cable from sub-1.2400 to 1.2427 ahead of comments from BoE’s Haskel.

SCANDI/EM

Some respite for the Sek and Nok as the market mood continued to improve and Brent held relatively firm around Usd 76/brl, while the Mxn took a widely expected unchanged Banxico rate decision largely in stride, but the Zar and Try continued to underperform on bearish SA and Turkish specifics.

19 May 2023 - 10:28- Fixed IncomeData- Source: Newsquawk