EUROPEAN FX UPDATE: Greenback grounded ahead of FOMC minutes

Analysis details (10:23)

DXY

The Buck returned from Independence Day with a mild bid that nudged the index up to 103.210 and a marginal new w-t-d peak from 102.750 trough on Monday. However, the Dollar was mixed against its major counterparts awaiting this week’s main events, including FOMC minutes, the non-manufacturing US ISM, initial claims and NFP and in recognition of ongoing intervention or the threat of action to prevent several currencies depreciating further. In terms of the more immediate focus, factory orders data is scheduled alongside revisions to durable goods that were stronger than forecast first time out and Fed’s Williams is due to speak after the aforementioned minutes.

AUD/CAD

0.6700 likely posed a psychological barrier for the Aussie against its US peer, but PMIs and AIG’s manufacturing index hardly helped as the services and composite headlines both slipped towards the key 50.0 mark and the latter turned more negative to offset a decent rebound in construction. Aud/Usd retreated from just shy of the round number to 0.6665 and also took note of a bounce in Usd/Cny and Usd/Cnh in wake of worrying Caixin Chinese services and composite PMIs. Meanwhile, the Loonie was undermined by Canada’s manufacturing PMI slipping deeper into contraction and a downturn in oil after the UEA Energy Minister said it will not be joining other crude producers in extra cuts at the current juncture at the start of OPEC’s International Seminar over the coming two days, as Usd/Cad climbed from circa 1.3220 to 1.3277.

JPY/EUR/GBP/NZD/CHF

The Yen continued to ‘rely’ on anticipated exporter supply, if not official offers in Usd/Jpy around 145.00 rather than fundamentals, like relatively solid Japanese services and composite PMIs or Japan's Labour Confederation Rengo saying the average 2023 wage hike is 3.58% and the biggest rise since 1993, with Usd/Jpy seemingly content to pivot 144.50  Elsewhere, the Euro appeared to be hampered by 2.7 bn option expiry interest at the 1.0900 strike instead of mostly weak Eurozone services and composite PMIs along with cooler ECB consumer inflation expectations for the year ahead as Eur/Usd was top heavy within a 1.0907-1.0867 range, but the Pound was underpinned by unrevised final UK services and composite PMIs and largely retained 1.2700+ status, and the Kiwi remained elevated between 0.6206-0.6182 parameters amidst stronger Aud/Nzd tailwinds, irrespective of a drop in NZ commodity prices. Conversely, the Franc lagged somewhat in the absence of Swiss specifics bar further reflection on recent heavy FX reserve and sight deposit flows, with Usd/Chf veering higher from 0.8963 towards 0.8990.

SCANDI/EM

Yet more pain for the Sek via Sweden’s services PMI falling below 50.0, while the Nok was ruffled by the UAE/China-related downturn in Brent, but the Try failed to benefit from cheaper crude or softer than consensus Turkish CPI and the Zar did not glean much traction from hawkish remarks by the SARB Governor in the face of broad risk aversion.

05 Jul 2023 - 10:23- Research Sheet- Source: Newsquawk