EUROPEAN FX UPDATE: Yen relents and gives Greenback another fillip

Analysis details (10:25)

DXY/JPY

The Dollar was reprieved by dovish tones emanating from the ECB yesterday that undermined the Euro and received a further boost from renewed Yen weakness when the BoJ stuck to its ultra-accommodative stance and Governor Kuroda maintained that above target inflation is likely to be transitory in his post-meeting press conference. He also reiterated that monetary policy does not target FX rates and Japan has a history of suffering from a strong Jpy, implying little inclination to supplement direct currency intervention with any shift in interest rates or QQE, for now at least. In response, Usd/Jpy rebounded sharply from circa 146.00 or just below towards 147.75 and the index probed 111.00 from a 110.280 low and 109.530 trough on Thursday as a result.   

AUD

Multiple negative factors continued tol weigh on the Aussie, including a meltdown in iron ore prices, Yuan depreciation, broad risk aversion and headwinds via the Aud/Usd cross. Aud/Usd hovered just above 0.6400 compared to a 0.6500+ w-t-d peak irrespective of some banks raising calls for the RBA next week to a 50 bp rather than 25 bp following the October pivot.

CHF/NZD/GBP/CAD/EUR  

All in retreat against the Buck, albeit to varying degrees with the Franc reversing through 0.9950 and not helped by a sub-forecast Swiss KOF reading, the Kiwi back under 0.5800 having made a false break of the 50 DMA overnight, the Pound precarious on the 1.1500 handle, the Loonie losing impetus from oil and slipping beneath 1.3600 pre-Canadian monthly GDP, and the Euro extending its post-ECB losses to 0.9927 at one stage from almost parity regardless of particularly hawkish rhetoric from Kazmir. In short, rates will rise in December and early 2023, crossing neutral like a 'runaway train'  - see 9.00BST post on the Headline Feed for more bullets. Note, only modest upside in Eur/Usd following stronger than expected inflation data from Germany’s states, France and Italy in contrast to Spain and perhaps 1.9 bn option expiry interest at 1.0000 kept the headline pair capped.

SCANDI/EM

The Sek and Nok both underperformed vs the Eur and slowdowns Swedish and Norwegian retail sales might have been a drag along with a downturn in Brent for the latter, but the former held above 11.0000 with some encouragement from GDP exceeding consensus in Q3. Elsewhere, more technical pain (stock and chart-wise) for the Cny and Cnh after reports that US President Biden is mulling further controls on Chinese firms, and to the extent that a warning from the CBIRC that those who sell the Yuan now will regret it, only provided limited and short-lived respite.

28 Oct 2022 - 10:25- Fixed IncomeData- Source: Newsquawk