EUROPEAN FX UPDATE: Aussie regains composure, but Swedish Crown down post-data

Analysis details (10:26)

AUD/NZD

Having been hit especially hard on Friday when risk sentiment soured and the Greenback was rebounding strongly on safe haven grounds,’ a rise in 5 year UoM inflation expectations and hawkish Fed rhetoric, the Aussie regrouped amidst a solid recovery in base metals and an aggressive call from NAB on rates, as the bank ventured that the RBA peak would reach at least 4.10%, while 4.35% could be seen if data remains stronger for longer. For reference or context, money markets were only assigning an 11% probability for another ¼ point hike at the June policy meeting from the current 3.85% level at the time. Aud/Usd bounced from sub-0.6650 to within single digits of 0.6700 and the Kiwi reclaimed 0.6200+ vs its US rival even though Aud/Nzd was buoyant between 1.0725-50 parameters ahead of Aussie consumer sentiment, RBA minutes and Chinese data.

DXY/CAD/GBP/EUR/CHF

Aside from handing back some gains to the Antipodes, as noted above, the Buck eased off more broadly due to a pick up in risk appetite, albeit modest in Europe, and perhaps a general loss of momentum allied to some technical factors. Indeed, the index only just eclipsed the prior session high (102.710) and a Fib retracement level (102.728)  at 102.750 before fading and testing semi-psychological support around 102.500 to the benefit of most DXY components, bar the Yen and Swedish Krona. The Loonie drew some encouragement from WTI keeping tabs with Usd 70/brl and recouped declines from beneath 1.3560 towards 1.3500 in advance of Canadian housing starts and wholesale trade, while Sterling contained losses under 1.2450 and got close to 1.2500 awaiting very topical remarks from BoE’s Pill on the cost of living crisis and current economic conditions, though not until 17.00BST. Elsewhere, the Euro was largely contained within Fib (1.0875) and half round number bounds as it meandered from 1.0846 to 1.0880 with little reaction to weaker than expected Eurozone ip, and the Franc held an even tighter line just above 0.9000 irrespective of a marked y/y slowdown in Swiss producer and import prices that was largely caused by base effects.

SEK/JPY

The G10 laggards, and softer than forecast Swedish inflation metrics clearly undermined the Crown as Eur/Sek spiked to a fraction shy of 11.3200 from around 10.2500, while the Yen retreated from circa 135.61 to 136.26 in wake BoE Governor Ueda reiterating the need to maintain ultra-easy policy at the G7 rather than somewhat mixed Japanese corporate goods prices.

NOK/EM

No traction for the Nok from a wider Norwegian trade surplus or Brent pivoting Usd 74.00/brl, but it held up better than the Try following an inconclusive first round Turkish election result leaving uncertainty into the second round in two weeks, or perhaps the fact that incumbent President Erdogan performed better than anticipated and has such an unorthodox stance. Conversely, the opposition ousted the military regime in Thailand and the Thb fell in response and much softer than consensus Indian wholesale prices hardly helped the Inr, but the Zar outperformed as SA’s Finance Minister said it had resolved issues with the US over allegations of supply Russia with weapons, and the Cnh/Cny rebounded from worst levels alongside Chinese stocks prior to the PBoC’s Q1  Monetary Policy Implementation Report stating that inflation may rebound gradually in H2 2023, prudent monetary policy will be precise and forceful, it will keep policy reasonably ample, rates reasonable and appropriate (see 10.02BST and 10.16BST posts on the Headline Feed for more). On that very note, the PBoC held the 1 year MLF rate at 2.75% overnight, as expected, and added Cny 25 bn net liquidity.

15 May 2023 - 10:26- Fixed IncomeGeopolitical- Source: Newsquawk