EUROPEAN FX UPDATE: Yuan depreciation helps Greenback reap greater gains

Analysis details (10:10)

DXY/CNY/CNH

The Buck took a breather after bouncing in wake of yesterday’s better than expected US data, on balance rather than overall, but it was short-lived and shallow before an even stronger rebound on a mixture of external and internal factors. Specifically, the Dollar was boosted by more pronounced weakness in the Yuan on the back of recent below consensus Chinese macro releases prompting concerns about the economic recovery from Covid lockdown and evident via Nomura downgrading its GDP forecasts for 2023 and 2024 to 5.5% and 4.2% respectively from 5.9% and 4.4% previously. Usd/Cny probed the psychological 7.0000 level and Usd/Cnh extended towards the next pivotal technical resistance point, at 7.0364 (50% Fib retracement). Meanwhile, the DXY may have derived encouragement and garnered momentum from the fact that it held above 102.500 amidst some chinks of light through the debt ceiling following latest ‘productive’ talks, as it rallied to 103.000 at best in advance of housing starts and building permits.

JPY/GBP

Yen losses were eventually stemmed close to the 200 DMA rather than bullish Japanese fundamentals, as Usd/Jpy spiked from 136.31 to 137.09 irrespective of Q1 GDP coming in considerably above forecast overnight in q/q and q/q annualised terms. Conversely, Sterling may still have been feeling the adverse effects of Tuesday’s downbeat labour market metrics or just caution ahead of comments from BoE Governor Bailey at the BCC, with Cable down to 1.2422 from just under 1.2500 at one stage and Eur/Gbp back over 0.8700 after anti-Brexit remarks EU automaker Stellantis.  

CHF/EUR/AUD/CAD

All unable to evade their US peer’s clutches, as the Franc eyed round number support at 0.9000, the Euro retested lows not seen since April 10 circa 1.0832, the Aussie largely shrugged off mixed wage prices on the way to ducking beneath last Friday’s 0.6635 session base and the Loonie unwound more of its post-headline Canadian CPI strength between 1.3463-1.3535 parameters. 

NZD

The lone G10 outperformer, though benefiting from a gusty Aud/Nzd tailwind as Nzd/Usd held firmly above 0.6200 on approach to PPI data that could provide the Kiwi with some independent inspiration.

17 May 2023 - 10:10- ForexData- Source: Newsquawk