EUROPEAN FX UPDATE: Yuan weakens amidst mixed data and less PBoC fixing

Analysis details (10:02)

DXY/CNH-CNY

Having extended recovery gains with the aid of an upbeat prelim UoM survey on Friday, the Dollar index ran into more resistance around the psychological 100.000 level and faded within a 100.020-99.751 range awaiting another regional release in the form of the Empire State. However, the Buck remained rangy and mixed against its major rivals with underlying support from the Yuan in broader circles in wake of contrasting or conflicting Chinese data, including Q2 GDP, industrial production and retail sales. Moreover, the Cny and Cnh lost some impetus from the PBoC after it set a much more spot-like midpoint reference rate overnight and added only a small amount of net liquidity via an unchanged 1 year MLF. Usd/Cny and Usd/Cnh climbed towards 7.1800 and 7.1900 respectively from lows circa 7.1550 and sub-7.1500 and also took on board downgrades to 2023 GDP forecasts for China from JPM, Citi and MS, to 5% from 5.5% previously for the first two and from 5.7% in the case of the latter.

NZD/AUD   

The Kiwi was undermined by a downturn in NZ’s performance of services index to the brink of 50.0, while the Aussie felt contagion with the Yuan and also noted a rather frank assessment from Australian Treasurer Chalmers who said he expects a substantial economic slowdown and unemployment to increase as inflation eases. Nzd/Usd lost momentum between 0.6368-39 parameters and Aud/Usd drifted down from 0.6849 to 0.6805.

CHF/JPY/EUR 

Weekly Swiss sight deposits spiked, but the Franc may have paid more attention to the fact that IMM specs added to short positions as Usd/Chf retreated from 0.8625 and through 0.8600, while the Yen extended its recovery beyond 138.50 from 138.85 and lows beneath 139.00 on Friday as US Treasuries bounced in the absence of JGBs due to Marine Day in Japan, and the Euro secured a firmer grasp of the 1.1200 handle even though EGBs clawed back early losses on mainly technical grounds.

GBP/CAD     

Sterling lagged amidst ongoing UK economic jitters and strike action, while the Loonie fell in tandem with oil on Chinese growth concerns and the return of crude supply from two key Libyan sites. Cable was top-heavy within 1.3108-1.3066 bounds and Usd/Cad was underpinned between 1.3212-32 ahead of Canadian wholesale trade.

SCANDI/EM

No surprise that the Nok was hampered by a downturn in Brent for aforementioned reasons, while the Try suffered a double whammy as Turkey’s budget balance swung from surplus to almost double the deficit and the special consumption tax on oil and gasoline plus petrol was jacked up by around 200%.

17 Jul 2023 - 10:02- Research Sheet- Source: Newsquawk