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Sep 11 - 04:55 PM

EUR/USD - CORRECTED-BUZZ-COMMENT-US Recap: EUR/USD Rebounds On Yen, Yuan-Led Dollar Drop Pre-Data

By Randolph Donney  —  Sep 11 - 02:30 PM

Treasury yields in 5th paragraph corrected to 4.99% and 4.29%

The dollar broadly fell on Monday as USD/JPY tumbled in response to BoJ Governor Kazuo Ueda's weekend interview suggesting scope for a rate hike by year-end, and USD/CNH dove 0.8% following firmer Chinese inflation and lending data and forceful PBoC actions to support the yuan.

EUR/USD rose 0.46% amid the broader dollar retreat and despite the EU Commission cutting its euro zone growth forecast amid Germany's recession.

The only U.S. economic news was the New York Fed's August Consumer Sentiment Survey that showed little change in inflation expectations, but more concern about job prospects and financial conditions.

After eight straight weeks of losses, EUR/USD was ripe for consolidation before U.S. CPI, PPI and retail sales midweek and the ECB meeting on Thursday.

USD/JPY tumbled to its lowest since Sep.
1's 144.44-6.30 recovery range, but Monday's 2-year and 10-year rises in JGB yields to 0.047% and 0.69% are being weighed against 2- and 10-year Treasury yields at 4.99% and 4.29% that remain attractive.

More important for USD/JPY are the upcoming top-tier U.S. data and whether the MoF have another go at supporting the yen, either verbally or with intervention.

Sterling was also drawn higher, gaining a less impressive 0.37%, regardless of Bank of England policymaker Catherine Mann's hawkish comments that contrasted somewhat with Governor Andrew Bailey last Wednesday saying the BoE was "much nearer" to ending its rate rising cycle.

GBP/USD's September slide has so far held above the 200-day moving average, now at 1.2428.
The immediate focus is Tuesday's UK employment report, with a whopping 185k drop in employment and 0.1% jobless rate increased forecast.

AUD/USD fell 0.8% amid strong gains in iron ore, copper and nat gas prices, boosted by hopes China's economy is bottoming and a strike at LNG facilities in Australia.

Tuesday brings German and euro zone ZEW updates, but the main event is Wednesday's U.S. CPI, with core forecast up 0.2% from July and up 4.3% from a year ago versus 4.7% in July.
Overall prices are forecast up 0.6% m/m and 3.6% y/y from July's 0.2% and 3.2% readings.

Thursday brings U.S. PPI and retail sales, the latter seen up 0.2% after a 0.7% rise in July.

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Refinitiv IFR Research/Market Commentary


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