EUROPEAN FX UPDATE: Yen extends rebound, while Pound pulls back from peaks

Analysis details (10:13)

DXY/JPY/GBP

The Dollar absorbed more pressure from China via various forms of intervention to prop up the Yuan, including the most heavily skewed PBoC midpoint fix for the Cny on record (1000+ pips above expectations in onshore terms), and the index withstood the Yen’s ongoing recovery amidst markedly softer US Treasury yields and ongoing risk aversion. Indeed, having survived a downturn to within a whisker of 103.000 on Thursday and closing just shy of a key technical level for the second session in a row, the DXY managed to hold firm between 103.220-510 parameters even though Usd/Jpy retreated further towards 145.00 where more hefty option expiry interest sat (1.3 bn). Conversely, Sterling reversed to the brink of 1.2700 again and was derailed by dire UK retail sales data, irrespective of the ONS blaming the weather or the fact that the weak consumption figures are highly unlikely to deter the BoE from delivering another ¼ point rate hike come September.

NZD/AUD/EUR/CAD/CHF

Aud/Nzd crosswinds continued to blow in favour of the Kiwi rather than anything NZ specific, albeit RBNZ's Silk said the housing recovery is a reason to keep rates higher for longer and the wealth effect from rising property prices may fuel spending. Meanwhile, the Aussie remained depressed post-downbeat labour market metrics and monitoring Yuan moves closely along with ongoing LNG industrial action. Hence, Nzd/Usd maintained 0.5900+ status, while Aud/Usd straddled 0.6400 and the aforementioned cross pivoted 1.0800. Elsewhere, the Euro kept close tabs on UST-EGB spreads and Eur/Usd hovered sub-1.0900 within tight confines around a Fib inside decent option expiries at 1.0850 and the round number (1.4 bn and 1.7 bn respectively), the Loonie meandered from 1.3555 to 1.3525 pre-Canadian PPI and RMP, and the Franc was undermined by a drop in Swiss IP as Usd/Chf climbed from 0.8775 to just over 0.8800.

SCANDI/EM    

Chop and churn for the Nok just a day after the Norges Bank’s 25 bp rate hike, with little to glean from relatively stable Brent crude, but a 1.5 bn expiry at the 11.5000 strike acting like a magnet vs the Eur. In China, yet more state bank buying of Cny and Cnh on top of the biggest net weekly cash injection since March, efforts to shore up stocks and prevent more property sector default. However, markets are expecting LPRs to be cut next and perhaps the RRR over the weekend as the onshore and offshore units stayed on the defensive around 7.2950 and 7.3150 respectively. Similar story for the Try circa 27.1000 against the Usd and hardly helped by worrying findings in the latest CBRT survey - Turkish end-2023 CPI seen at 59.46% vs 43.82% previously, 12-month CPI 42.01% from 33.21%, year end Lira at 29.8220 vs the prior 28.4560 and 12 month repo rate 23.25% from 21.48%.

18 Aug 2023 - 10:13- Fixed IncomeData- Source: Newsquawk