EUROPEAN FX UPDATE: Aussie and Loonie boosted by demand and supply dynamics

Analysis details (10:18)

AUD/CAD/NOK

The Aussie was still looking top heavy on 0.6900 and 1.1000 handles vs its US and NZ peers before breaking news from China prompted a pick-up in broad risk sentiment that lifted Aud/Usd over 0.6950 and the 10 DMA (at 0.6954) to circa 0.6965 and Aud/Nzd towards 1.1050. In short, headlines reported that Disney Shanghai will re-open on June 30 rather than a later date as had been envisaged, while the quarantine for international travellers will also be cut by approximately 50%. This also propelled crude and other commodities higher on the prospect of more Chinese demand after oil had already factored in supply-side premium on the back of French President Macron’s remarks at the G7 to his US counterpart Biden that Saudi Arabia and the UAE have limited extra production capacity. Hence, the Loonie and Norwegian Crown also benefited to the extent that Usd/Cad retreated further from recent peaks to sub-1.2850 and Eur/Nok probed 10.3100 from 10.3777 highs at one stage.

JPY/DXY

In contrast to all the above, renewed risk appetite and a sharp rebound in global bond yields are weighing on the Yen, with Usd/Jpy closer to 136.00 than 135.00 having bounced from just above 134.50 only yesterday, and the headline pair may be prone to further upside given purported month-end rebalancing demand for the Dollar and the fact that today is spot June 30. On that note, the index could hold above Monday’s low (103.660) between current 103.750-104.020 parameters or even extend to the upside as the Buck buying signal from bank models is broad-based and ranges from solid to strong. However, US trade data, consumer confidence and more regional Fed surveys loom ahead of comments from Daly for some fundamental impetus.

CHF/GBP/NZD/EUR

All marginally firmer against the Greenback, thoiugh still relative restrained as the Franc pivots 0.9550, Sterling roams within the upper half of a 1.2200-1.2300 band, the Kiwi straddles 0.6300 in the face of the aforementioned changing Aud/Nzd tide and the Euro continues to encounter resistance above 1.0600, mainly in the form of the 55 DMA (now 1.0614 vs 1.0619 yesterday), irrespective of some hawkish remarks emanating from the ECB’s Sintra Forum. To recap, President Lagarde reiterated that inflation in the Eurozone is undesirably high and projected to stay that way for some time to come, while Kazaks believes it is worth looking at half point hikes in both July and September rather than the base case of 25 bp and 50 bp respectively.

SEK/EM

The Sek shrugged off weak Swedish retail sales and another trade deficit, perhaps on the basis that the latter at least narrowed following a marked back month revision, but perhaps more on the premise that neither is likely to deflect the Riksbank from hiking rates by 50 bp on Thursday following another spike in inflation. Elsewhere, the Cnh and Cny got more PBoC liquidity to feed off overnight before the constructive Covid developments, but the Zar was hindered by SA’s Eskom issuing a warning that there is a very real risk of implementing stage 6 power cuts by 5pm local time today.

28 Jun 2022 - 10:18- Fixed IncomeData- Source: Newsquawk