EUROPEAN FX UPDATE: Aussie lagging and Yen flagging, but Euro recovering

Analysis details (09:28)

AUD/JPY/EUR/DXY

The Aussie is feeling the weight of declining commodity prices more than most, with contagion from weakness in the Yuan also undermining sentiment ahead of RBA minutes and Chinese data on Tuesday, while the Yen has extended losses on divergent yield and BoJ/Fed policy considerations heading into the FOMC that is widely expected to result in a 25 bp rate lift-off. Aud/Usd is hovering around 0.7350 and Usd/Jpy is pivoting 117.50, but the latter only really stalled before 118.00 by virtue of a pull-back in the Dollar index due to a firm bounce in the Euro amidst positivity surrounding the Russia-Ukraine situation based on constructive comments from both side over the weekend rather than actions on the part of the aggressor. Indeed, Eur/Usd has rebounded to just over 1.0950 from a low very close to or at 1.0900 where hefty 1.84 bn option expiry interest resides and the DXY has drifted back below 99.000 within a 99.297-98.824 range as a result.

GBP/CAD/CHF/NZD   

All narrowly mixed and relatively confined against the Greenback as Sterling holds in the bottom half of a 1.3100-1.3000 range on the eve of UK labour data that forms the final major piece of the macro jigsaw before Thursday’s BoE policy verdict (¼ point hike wholly expected and priced in). Elsewhere, the Loonie is straddling 1.2750 having lost momentum gleaned from Friday’s stellar Canadian LFS due to a more pronounced retreat in crude, the Franc is rotating either side of 0.9350 and nearer 1.0250 than 1.0200 vs the Euro with latest Swiss bank sight deposit balances inferring that official intervention resumed following restraint of late and the Kiwi is hoving just under 0.6800 in advance of NZ’s business PSI amidst supportive Aud/Nzd tailwinds as the cross slips back below 1.0700.

SCANDI/EM

Risk appetite is picking up broadly, but the Sek is outperforming in wake of stronger than forecast Swedish inflation metrics that may well push the Riksbank out of its comfort zone and has prompted Nordea to upgrade its outlook for the repo rate to two 25 bp hikes in 2022. Conversely, the Nok is having to contend with a marked retracement in Brent to the extent that it has not been able to glean much from bullish/hawkish remarks from the Norwegian Government. Eur/Sek is testing Fib support around 10.5252, while Eur/Nok is propped by bids circa 9.8000. Meanwhile, COVID-19 concerns, heightened angst between the US and China over techs and Russia, plus a lower PBoC midpoint fix are all putting pressure on the Cnh/Cnh, but the Rub is up on the prospect of further progress towards a peace deal or truce from the latest talks.

14 Mar 2022 - 09:28- Fixed IncomeResearch Sheet- Source: newsquawk