EUROPEAN FX UPDATE: Aussie reels post-RBA as guidance deemed less hawkish

Analysis details (10:27)

AUD/NZD

The RBA matched market expectations for another 25 bp hike overnight and made a relatively minor adjustment to the accompanying statement, as the Board now expects that further monetary policy tightening will be needed rather than further rate increases. However, the Aussie fell to lows not seen since late last year circa 0.6675 against the Greenback and sub-1.0800 vs the Kiwi from peaks around 0.6747 and 1.0868 respectively, with the Bank also acknowledging that monthly inflation data seems to suggest that CPI has peaked and this taken as a sign that the tightening cycle may be nearing an end following one or two more rises, according to Westpac, or perhaps in April per the CBA. Conversely, Nzd/Usd held around 0.6200 amidst the favourable Aud/Nzd tailwinds awaiting Fed Chair Powell’s semi-annual testimony to Congress, part one. Note, RBA’s Lowe is due to address Australia’s Senate Banking Committee later and trade data revealed a narrower than forecast surplus as imports exceeded exports by five-fold.

DXY/JPY/GBP

All eyes trained on and ears peeled for Powell in the absence of any top-tier US data before his speech, although a text may be released ahead of the 15.00GMT event, with the Dollar and index attempting to fend off more downside pressure in the interim. Indeed, the DXY slipped closer to 104.000 within a 104.110-470 range, but derived some encouragement and traction after keeping afloat of several significant levels against rivals, or paring declines as global bond yields recoiled sharply. Usd/Jpy held just above 135.50 and Cable topped out at 1.2065 before testing support into 1.2000 irrespective of typically hawkish comments from BoE’s Mann.

CAD/CHF/EUR    

The Loonie remained defensive on the eve of the BoC in a narrow band beneath 1.3600, the Franc lost 0.9300+ status with little impetus from an in line and unchanged Swiss adjusted jobless rate or dip in the nsa measure, and the Euro narrowly missed reaching 1.0700 in the run up to the latest ECB consumer expectations survey showing a slightly softer 1 year ahead inflation forecast and more meaningful decline over the 3 year horizon. Eur/Usd subsequently reversed towards 1.0650 amidst a broader pullback in Euro crosses from Monday’s ECB Holzmann highs.

SCANDI/EM

Not much support for the Sek via remarks from Riksbank Governor Thedeen that sounded much more like official guidance in terms of getting inflation back down by a big margin and swiftly, while the Nok hardly gleaned impetus from a rebound in Norwegian manufacturing output as technical impulses continued to turn bearish. Elsewhere, the Huf was hardly helped by Hungarian ip missing the mark by some distance or the Zar when SA GDP fell quite a bit short of expectations, but the Czk took heed of CNB's Kubicek stating his preference to hold rates at current levels for longer. Conversely, the Cny and Cnh took some positives from China’s wider than anticipated trade surplus and the fact that exports did not drop as much as feared even though imports were considerably weaker than expected.

07 Mar 2023 - 10:27- Fixed IncomeData- Source: Newsquawk