EUROPEAN FX UPDATE: Aussie perks up as patient may prove plausible

Analysis details (10:12)

AUD/EUR/NZD

The general market tone continues to improve as Russia pledges to maintain a day of silence in Ukraine and a 12 hour ceasefire along the corridors arranged for civilian evacuation, while concerns about a shortage of gas in the EU have been averted to a degree as EU Commission President Von der Leyen claims there is enough in reserve to cover the higher demand levels seen over winter. However, the Aussie is heading the major pack in wake of comments from RBA Governor Lowe overnight that imply some prospect of a hike this year, albeit not as soon as some are predicting to ensure that the target of reaching maximum employment is not jeopardised. Aud/Usd is back on the 0.7300 handle and the Aud/Nzd cross is probing 1.0700 even though the Kiwi is rebounding from lows just under 0.6800 vs its US peer after a strong recovery in NZ manufacturing sales during Q4. Elsewhere, the Euro is clawing back more of its heavy declines suffered since war broke, with another ramp in EGB yields providing impetus on the eve of the ECB, as Eur/Usd cleared offers/resistance around 1.0950 having triggered stops on a break of 1.0957 that was a virtual double top, Eur/Jpy breaching 127.00 and Eur/Chf pivoting towards 1.0200.

DXY/CAD/GBP

Although US Treasuries are sliding alongside their EU counterparts ahead of 10 year note issuance, risk considerations are more than offsetting any rate premium or traction to leave the Buck broadly weaker and index down at a marginal new 98.514 w-t-d low. Conversely, recent laggards including the Loonie and Pound are benefiting from renewed risk appetite to the extent that a retreat in WTI and Brent prices are not impeding either currency. Indeed, Usd/Cad has recoiled from close to 1.2900 to sub-1.2850 and Cable has recovered from under 1.3100 to peer over 1.3150.

CHF/JPY/XAU

It goes without saying really, but the Franc and Yen are suffering a double-whammy given a loss of safe-haven status and their funding or carry characteristics. Hence, the former is treading water circa 0.9300 vs the Dollar and the latter is trying to keep its head above 116.00. Similarly, Gold is less sought after and having got agonisingly near its 2020 apex only yesterday is now striving to retain hold of the Usd 2000/oz level amidst stops tripped through Tuesday’s Usd 2021 trough.

SCANDI/EM

The Sek is relishing the revival in risk sentiment so much that a contraction in Swedish economic activity has been shrugged aside, but the Nok is less enamoured with the ongoing pull-back in Brent and the Rub is weighing up the crude retracement with positive sounding noises from Russia’s Foreign Ministry along the lines that the aims of its mission in Ukraine does not include overthrowing the Government. Moreover, other reports suggest that Russia has made some progress in talks with Ukraine.

09 Mar 2022 - 10:11- Fixed IncomeResearch Sheet- Source: Newsquawk