EUROPEAN FX UPDATE: Aussie hits multi-week highs after latest surprise RBA hike

Analysis details (10:23)

AUD/NZD

The Aussie ran into some resistance ahead of 0.6700 against the Greenback and around 1.0975 vs the Kiwi, but remained the clear G10 outperformer in wake of another largely unexpected 25 bp rate rise from the RBA overnight. Moreover, the Bank retained hawkish guidance to underscore the view that April’s inaction was a skip rather than pause, while Aud/Usd and Aud/Nzd were also underpinned by constructive Australian-Chinese vibes after the Trade Minister said a pathway was laid to resolve all trade disputes with China during a recent meeting. Aud/Usd probed a Fib at 0.6681 before fading a little way shy of the 200 DMA at 0.6691 and the cross topped out just over 1.0970 as the Kiwi attempted to piggy-back its Antipodean peer and touched 0.6100 against the Buck.

DXY/EUR/GBP/CHF

Monday’s post-US services ISM retreat extended a bit further before the Dollar and index found some underlying bids/support, with the latter dipping to 103.810 having closed just shy of the psychological 104.000 level. However, the DXY derived traction to a 104.080 peak amidst a firm bounce in bonds and loss of momentum in the Euro, Pound and Franc that offset ongoing recoveries in the Yen, Loonie and even the downtrodden Swedish Crown. Eur/Usd eased back from circa 1.0732 to sub-1.0700 and the base of 1 bn option expiries between the round number and 1.0695 without ever really threatening much larger interest at 1.0740-45 (2.9 bn), and the damage was done by significant declines in ECB consumer inflation expectations rather than comments from Knot, although the latter was a tad less hawkish on balance, or much worse than forecast German factory orders. Elsewhere, Sterling was undermined by weaker than consensus BRC retail sales to an extent, as Cable drifted down between 1.2458-08 parameters, while the Franc straddled 0.9050 in the absence of anything Swiss-centric.

JPY/CAD/SEK/NOK

As noted above, the Yen continued to claw back losses at the expense of its US counterpart as yields softened and crude prices unwound all and more of their Saudi production cut premium, with Usd/Jpy reversing from 139.65 towards 139.10 irrespective of Japanese household spending and labour cash earnings fall short of expectations or BoJ Governor Ueda maintaining a dovish stance, but the Loonie also rebounded within a 1.3450-1.3391 range as the RBA hike fuelled perceptions that the BoC may revert to tightening mode tomorrow. Meanwhile, the Swedish Krona outpaced its Norwegian rival, albeit in consolidative and corrective price action as the latter contained Brent-related losses to 11.8500 vs the Euro.

EM  

The Cny and Cnh remained under pressure as sources reported that China’s biggest banks were asked to lower deposit rates to boost the economy and the country’s strained diplomatic relations continued to weigh on the Yuan, the Try suffered deeper losses on various Turkish concerns and the Pln was ruffled by heightened Russia-Ukraine hostilities in the run up to the NBP in contrast to the Zar that made more technical gains.

06 Jun 2023 - 10:23- Fixed IncomeData- Source: Newsquawk