EUROPEAN FX UPDATE: Yen continues to reap most from, or add to Dollar’s demise

Analysis details (10:27)

DXY/JPY

The Buck remained deflated in wake of another US CPI release showing a slowdown in inflation, but the downside pressure was exacerbated by the Yen’s ongoing resurgence on speculation that the BoJ will expand its YCC tolerance band further. Indeed, Usd/Jpy saw follow-through selling to breach 129.50 support, 129.00 and 128.50 on the way to targeting 128.00 as the next bearish psychological target in the absence of anything really technical until much lower down. Moreover, flow data via trading platforms suggest that the volume of sales was very heavy and adding to Greenback weakness in general as the index probed 102.000 within a lower 102.430-101.970 range amidst solidified expectations that the Fed will slow the pace of tightening to 25 bp at the start of next month.

AUD/GBP/NZD/CAD 

All up, and largely at the expense of their US counterpart, though Sterling did receive some benefit from UK m/m GDP showing slender 0.1% growth rather than the 0.2% contraction predicted. Conversely, the Aussie was not helped by steeper than forecast falls in home loans and owner-occupied finance, but a smaller than expected decline in Chinese imports offered a degree of encouragement, as Cable reclaimed 1.2200+ status and Aud/Usd rebounded from just under 0.6950 to get within 6 pips of the round number above. Elsewhere, the Loonie held firmer between 1.3322-96 parameters and the Kiwi hovered just below 0.6400 within a 0.6415-0.6357 band.

EUR/CHF

Marginal G10 underperformers or laggards with the Euro unable to advance on an effective double top around 1.0867-68, albeit retaining a firm grip of the new big figure vs the Dollar more hawkish ECB commentary, and the Franc losing momentum having stalled in advance of 0.9250 and with the Eur/Chf cross extending to almost 1.0100 following its more decisive break through parity, partly on broad risk and diverging ECB/SNB policy outlooks.

SCANDI/EM

Some respite for the Nok and Sek, as the latter took on board above consensus Swedish CPI and CPIF metrics, while the Huf was underpinned by firmer core Hungarian inflation even though the headline missed by a greater margin. Meanwhile, the Cny and Cnh forged more gains against the Usd as China’s trade surplus topped consensus, with the former close to barriers at 6.7000 at best and the latter testing a key Fib retracement level. However, the Try failed to derive any real traction from the latest CBRT survey even though the year-end Turkish CPI forecast was slashed.

13 Jan 2023 - 10:27- Fixed IncomeData- Source: Newsquawk