EUROPEAN FX UPDATE: Yen yields to almost inevitable test of 150.00

Analysis details (10:23)

DXY/JPY  

The Greenback encountered some resistance from a few G10 rivals and the index failed to extend gains through 113.000 beyond yesterday’s peak (113.009) that could have cleared the path towards Monday’s w-t-d high (113.200), but it did probe a psychological level vs the Yen, at 150.00, albeit briefly amidst another slide in US Treasuries. Usd/Jpy chipped away at remaining offers ahead of the round number as JGBs bounced in wake of BoJ intervention to cap yields and the headline pair topped out around 150.08 before a bout of corrective price action and perhaps some caution over the prospect of official action. However, Japanese Finance Minister Suzuki stuck to very familiar lines in response, such as the Government cannot tolerate speculative moves, it will continue to watch currency developments carefully and take action against any speculative, excessive and sudden moves. Subsequently, top FX diplomat Kanda was coy when refusing to comment whether Japan is intervening now or has today.

CHF/NZD

Although Swiss trade data was supportive on paper given a wider surplus and acceleration in key watch exports, the Franc fell victim to adverse funding factors again and Usd/Chf extended further above parity, to 1.0069, while the Kiwi lagged either side of 0.5650 awaiting the latest NZ trade update.

EUR/AUD/CAD

The Euro derived some traction from firmer than German PP metrics, but more via the ongoing rout in EGBs that saw Bunds breach 135.00 to the downside and the 10 year yield top 2.45%. Moreover, Eur/Usd pared losses after another dip through chart support in the form of 21 and 10 DMAs to circa 0.9754, though remained capped into 0.9800 where a chunky 1.98 bn option expiries are due to roll off at the NY cut. Elsewhere, the Aussie laboured following disappointing payrolls overnight, but pared some losses from sub-0.6250 lows in tandem with the Yuan after reports that China may ease Covid quarantine rules for overseas visitors, while the Loonie gleaned some impetus from another upturn in crude prices within 1.3807-1.3744 confines.

GBP

Sterling was undermined between 1.1241-1.1171 parameters vs the Dollar by relatively dovish remarks from BoE’s Broadbent in a speech on the inflationary consequences of real shocks and specifically the comment that it remains to be seen if rates need to rise as much as markets are currently factoring in, but the major issues for the Pound revolved around Westminster where the heat cranked up in terms of pressure on PM Truss to depart of her own accord or be forced out.

EM

No respite for the Inr as oil continued to simmer, but the Idr got confirmation of another 50 bp BI rate hike to lean on in stark contrast to the Try that is expecting the CBRT to ease under persistent pressure from Turkish President Erdogan.

20 Oct 2022 - 10:23- Fixed IncomeEconomic Commentary- Source: Newsquawk