EUROPEAN FX UPDATE: 2nd wind for the Kiwi and price surge for Swedish Krona

Analysis details (10:09)

DXY

It might seem rather counterintuitive or just belated, but the Buck has backed off sharply alongside US Treasury yields only a day after significantly stronger than expected PPI data. Instead, it appears that the Greenback is reflecting on Tuesday’s largely sub-consensus CPI readings and perhaps latest comments from Fed’s Waller who contends that inflation may now have peaked, especially given his more hawkish leanings. Looking at the index as a proxy, a deeper retreat from its new y-t-d peak (100.520) and through the big round number leaves it meandering between 99.885-567 ahead of a busy docket before the long Easter holiday weekend, including jobless claims, retail sales, business inventories, preliminary Michigan sentiment all before more Fed commentary courtesy of Mester and Harker.

NZD/AUD/SEK

In contrast to the above, the Kiwi is on the rebound following its fleeting post-RBNZ rise and unceremonious fall, albeit still not that comfortable on the 0.6800 handle vs its US counterpart and benefiting from another turnaround in the Aud/Nzd tide on the back of weaker than forecast Aussie labour metrics. The cross is back under 1.0950 and Aud/Usd is hovering shy of 0.7450 in response to payrolls rising 17.9k vs an anticipated 40k and the jobless rate remaining unchanged at 4% compared to the expected dip to 3.9%. Elsewhere, Swedish Crown outperformance follows yet another set of scorching CPI, CPIF and even ex-energy CPIF prints that prompted SEB to bring forward its Riksbank rate hike call to June from November, while also assigning a high probability of a move this month. Nevertheless, Eur/Sek looks a tad reluctant to break below 10.30000 without official recognition of the latest inflation overshoots.

EUR/JPY/GBP/CAD/CHF    

The Euro, Yen and Pound are all taking advantage of their US rival’s loss of upward momentum, with Eur/Usd 100+ pips off its midweek trough that was fractionally above the 2022 low (1.0809 vs 1.0806), Usd/Jpy testing support into 125.00 having hit 126.32 on Wednesday and Cable closer to 1.3150 than 1.2950 after sliding to circa 1.2972 yesterday. However, the Euro has major event risk looming in the shape of the ECB policy meeting and press conference with more emphasis on what President Lagarde says in terms of the impact on growth and inflation from conflict between Russia and Ukraine - full preview available under the Research Suite section of the website. Meanwhile, the Loonie is straddling 1.2550 against its US in wake of the hawkish BoC hike and QT announcement, but the Franc is flagging near 0.9350 and 1.0200 vs the Euro irrespective of a pick up in Swiss producer/import prices.

NOK/EM

Softer Brent on balance is undermining the Nok and Rub, though the latter may be taking heed of aggressive words from Russia as well warning that a nuclear free Baltic zone will not be an option if Sweden and Finland join NATO, Conversely, the Krw and Sgd are both rallying with support from a surprise 25 bp BoK hike and tightening of the peg by the MAS, but the Cnh has retreated from overnight highs helped by a firm PBoC Cny midpoint fix as speculation mounts about imminent easing (RRR, MLF cuts touted and possibly as quickly as Friday, according to some pundits).

14 Apr 2022 - 10:09- Fixed IncomeData- Source: Newsquawk