EUROPEAN FX UPDATE: Aussie reliant on RBA and Euro on expiries

Analysis details (10:22)

DXY/JPY/CHF/EUR  

The risk pendulum continues to swing and spotlight switch from China’s Covid travails to the ongoing Russia-Ukraine conflict that has spilled over to Moldova and resulted in Russian gas supplies halted to some countries with the threat of others being suspended if demands for payment in Roubles are not met. However, the US and Buck by association remain relatively insulated from the bulk of contagion, while a hawkish Fed is adding to the Dollar’s safe haven appeal and status as the world’s reserve currency. Hence, the index continues its almost relentless rise with eyes on the 2020 high at 102.990 compared to 102.780 at best, thus far, and the Dollar has seen off a spirited Yen recovery in the process. Usd/Jpy did probe 127.00 overnight, but bounced amidst reports of buying by Japanese importers and extended the rebound to 128.10 in early European trade when the Greenback was rallying generally. Indeed, the Franc dipped below 0.9650 at one stage and the Euro lost 1.0600+ status after breaching its 2 year-plus low and interim support on some charts at 1.0620 to hit a new multi-year trough around 1.0588. However, Eur/Usd may glean some traction via decent option expiry interest at the round number and any residual psychological or sentimental underlying bids, at least until the 1.4 bn rolls off.

AUD/NZD

Considerably stronger than forecast inflation data has stoked calls for the RBA to lift-off even earlier than many were anticipating, with the likes of JPM and Soc Gen now looking for a hike next week, but the Aussie has been undermined to an extent by the sheer strength of its US peer as Aud/Usd drifts back from circa 0.7191 to just shy of 0.7150 even though the Aud/Nzd cross is still elevated within a 1.0916-1.0854 range. Similarly, the Kiwi waned 9 pips or so before 0.6600 and now awaits NZ trade for some independent impetus and direction.

CAD/GBP

Different day and level, but the Loonie faces another battle to contain losses against its US rival, with Usd/Cad now approaching 1.2850 in advance of more commentary from BoC’s Macklem, while Sterling has also extended its losing streak to sub-1.2550 with little hope of any respite from UK CBI distributive trades that are expected to fall.

SCANDI/EM

A raft of Swedish macro releases and some fundamental backing in terms of outside shouts for the Riksbank to raise the repo tomorrow, as PPI gathered pace and the trade surplus widened to compensate for an unexpected increase in the jobless rate. Eur/Sek straddles 10.45000, while Eur/Pln is weighing the cost of Russia cutting gas to Poland against latest hawkish NBP guidance, with Kochalski seeing more scope to tighten and not ruling out another full point hike. Conversely, the Cnh and Cny have lost RRR traction as the current Chinese coronavirus wave continues and the Zar’s corrective retracement comes against the backdrop of Gold losing grip of the Usd 1900/oz handle again and tripping some stops beneath Usd 1890.

27 Apr 2022 - 10:21- Fixed IncomeData- Source: Newsquawk