EUROPEAN FX UPDATE: Yen shorts squeezed in vain as BoJ sticks to ultra-easy refrain

Analysis details (10:19)

DXY/JPY/EUR

The Dollar index regained just enough poise in the face of a relatively strong Yen rebound to ensure a second consecutive close around a key technical pivot on Thursday and was consolidating in wake of the BoJ maintaining its accommodative stance with no hints of a change in guidance via the accompanying statement or post-meeting remarks from Governor Ueda. Usd/Jpy snapped back up towards 148.50 from 147.52 in response, and the DXY formed a firmer base either side of 105.500 before spiking to 105.780 when the Euro was hit by weaker than forecast preliminary French PMIs. However, Eur/Usd retained 1.0600+ status with ongoing support via a Fib and was further reprieved by Germany exceeding expectations ahead of the pan Eurozone release. Nevertheless, the Buck was underpinned awaiting the flash US PMIs and the first scheduled Fed speakers following Wednesday’s hawkish FOMC hold including Daly, Cook and Kashkari.

GBP

Only short-lived respite for Sterling as a somewhat surprise improvement in GfK consumer sentiment was sullied by UK retail sales missing consensus and followed by mainly worse than anticipated preliminary PMIs, with the only crumb of comfort coming from less contraction in the manufacturing sector. Cable retreated from circa 1.2299 to test sub-1.2250 prior session lows, but returned to the half round number where unusually large 1.1 bn option expiry interest sat.

NZD/AUD/CAD/CHF

No real rhyme or reason for the latest Kiwi revival given that NZ’s trade deficit almost doubled in size last month, though the Aussie did get some fundamental incentive from flash PMIs living up to their name on the services and composite front. Nzd/Usd climbed from 0.5920 to 0.5957 and Aud/Usd probed the 21 DMA within a 0.6405-40 range. Elsewhere, the Loonie hovered between 1.3460-87 parameters in advance of Canadian retail sales and the Franc pivoted 0.9050 post in the aftermath of its heavy SNB induced losses.

SCANDI/EM

The Sek remained rangy post-Riksbank and was largely unresponsive to more attempts to talk the currency up by Governor Thedeen (reckons it is 10-15% too cheap), but the Nok held an underlying bid after the Norges Bank’s hawkish hold, the Cny and Cnh were buttressed by another well below neutral weighted PBoC midpoint fix and the Inr got a fillip from JPM confirming that Indian bonds will be included in its EM index from end Q2 next year.  

22 Sep 2023 - 10:19- Fixed IncomeData- Source: Newsquawk