EUROPEAN FX UPDATE: Yen soars on Yomiuri story, Yuan on PBoC machinations

Analysis details (09:51)

DXY/JPY/CNY-CNH

After withstanding relatively intense pressure from a data-inspired Loonie on Friday, the Greenback came under a double-pronged attack via the Yen and Yuan that proved too hot to handle and the index duly gave up 105.000+ status before testing support into 104.500. In short, BoJ Governor Ueda gave an interview to Yomiuri during which he said that the Bank cannot rule out that it might have sufficient data by year-end to determine whether it can end negative rates and will do so if it judges that achieving the price target becomes possible. Meanwhile in China, data confirmed CPI coming out of deflationary territory, the PBoC set its most below consensus and skewed midpoint fix for Usd/Cny to date (-1289 pips to be precise) and held an FX mechanism meeting at which it expressed confidence in maintaining Yuan stability, while it noting that China's self-regulatory FX body stated the Yuan exchange rate has a solid basis to stay at reasonable and balanced levels. Furthermore, the body pledged to take actions when needed to correct one-sided and pro-cyclical activities and said it will resolutely fend off currency overshooting risks. Usd/Jpy reversed from 147.27 to probe a key Fib and 146.00, while Usd/Cny and Usd/Cnh retreated from just over 7.3250 and circa 7.3660 respectively towards 7.2700 and 7.2900 before stalling around technical supports including 21 DMAs and Fibs.

AUD/NZD

No real shock that the Aussie piggy-backed the Yuan and the Kiwi tagged along, but the Aud/Nzd crossed rebounded through 1.0850 after its recent ahead of NZ electronic card retail sales, Aussie consumer sentiment, NAB business conditions and confidence. Aud/Usd and Nzd/Usd regained footholds above 0.6400 and 0.5900, albeit falling ahead of semi round numbers as the Buck regrouped.

GBP/EUR/CAD/CHF   

All firmer against their US rival, but Sterling top-heavy above 1.2500 in the absence of anticipated commentary from BoE’s Pill, the Euro capped into 1.0750, the Loonie unable to breach 1.3600 convincingly and the Franc finding hard to scale 0.8900 as weekly Swiss sight deposits ended a run of declines.

SCANDI/EM

The Nok was hampered by much cooler than forecast Norwegian headline and core inflation readings, but cushioned by Brent keeping afloat of Usd 90/brl, while the Try did not glean as much impetus as it could from a pronounced recovery in Turkish ip as the current account balance swung into deeper deficit than expected and the Pln was not that impressed with NBP's Kotecki assuming that there will be a pause in rate cuts in October as it continued to reel in shock at last week’s three times bigger than consensus 75 bp ease. Conversely, the Zar took a turn for the better in chart terms as a 19.0000+ Fib was only probed briefly and Gold formed a base above Usd 1900/oz.

11 Sep 2023 - 09:51- Research Sheet- Source: Newsquawk