EUROPEAN FX UPDATE: Buck regains poise after month end wobble

Analysis details (10:40)

DXY/CHF/JPY/EUR

The Dollar pared some post-US PCE and Chicago PMI losses by the close of business on Friday and gathered a bit more upward momentum amidst a rebound in Treasury yields and retreat in several rival currencies, like the Franc that seemed to take more note of softer than forecast Swiss inflation data rather than a less contractionary than feared manufacturing PMI or hefty declines in sight deposits. Meanwhile, the Yen was undermined by wider UST/JGB spreads to the extent that it failed to get any lasting impetus from a better than expected Japanese Tankan survey and the Euro was hampered by mixed Eurozone manufacturing PMIs that resulted in a downward tweak to the overall headline. The index bounced from 102.860 to 103.270 at best, while Usd/Chf rebounded towards 0.9000 from sub-0.8950, Usd/Jpy to 144.88 from 144.23 and Eur/Usd retreated from 1.0918 to 1.0871 amidst decent option expiry interest spanning 1.0925-30 to 1.0850-40, including 1.2 bn bang on the 1.0900 strike. Ahead, the final US manufacturing PMI, ISM and construction spending before an early close on the eve of Independence Day.

CAD/GBP

Loonie losses may have been compounded due to the lack of local participants on Canada Day, but relatively firm and stable crude prices kept Usd/Cad contained either side of 1.3250 on the eve of the manufacturing PMI, even before Saudi Arabia announced that it intends to extend its voluntary 1 mn bpd output cut through August. Conversely, the Pound floundered after running into resistance just above 1.2700 at the 10 DMA (1.2707) irrespective of a marginal upward revision to the final UK manufacturing PMI.

NZD/AUD

The Kiwi outperformed down under, as the Aud/Nzd cross reversed through 1.0850 awaiting what is expected to be another close call RBA policy meeting on Tuesday (see 9.23 BST post on the Headline Feed for our preview of the event) and Nzd/Usd got a tailwind between 0.6158-24 parameters. However, the Aussie derived underlying and indirect support within a 0.6638-75 range against the Greenback via building approvals blitzing forecasts circa 10-fold and China’s Caixin PMI holding up better than anticipated.

SCANDI/EM

No shock that the Nok got a boost from Brent rallying almost Usd 2/brl at one stage to Usd 76.60 and a rise in Norway’s manufacturing PMI, but the Sek remained depressed in wake of Sweden’s manufacturing PMI staying some way below 50.0 and the Huf was jolted by a huge slide in the Hungarian manufacturing PMI from 57.1 to 44.2. Elsewhere, the Czk was underpinned by hawkish commentary from CNB Governor Micl who said the Bank is not considering cutting rates and will likely get inflation to below 10% in the next two months, but it can be more persistent than the CNB thinks and it would have to raise rates if demand was to revive. Last, but by no means least, the Cny and Cnh clawed back more losses following the aforementioned Chinese PMI and another very high PBoC midpoint fix for the onshore Yuan overnight.  

03 Jul 2023 - 10:40- Research Sheet- Source: Newsquawk