EUROPEAN FX UPDATE: Aussie retreats post-RBA, but Yen continues to rebound

Analysis details (09:55)

AUD/NZD

A double-whammy for the Aussie as longs looking for a more hawkish RBA outturn were left somewhat disappointed and risk sentiment in general took a turn for the worst on a possible flare up of US-China tensions over Taiwan. To recap, rates were raised another half point as widely expected, while guidance for further tightening was maintained and the Bank reiterated no preset path for policy normalisation rather than hinting at a faster pace to get to a neutral level of around 2.5% from 1.85% at present. Meanwhile, markets were on tenterhooks to see if US House Speaker Pelosi touched down in Taipei for talks amidst ongoing threats of Chinese reprisal and the combination knocked Aud/Usd back further from almost 0.7050 towards 0.6900, as Aud/Nzd faded from nigh on 1.1100 to sub-1.1020 and Nzd/Usd held closer to 0.6300 in the run up to NZ jobs data that could give the Kiwi independent impetus.

JPY/DXY    

The Yen breezed through supposed strong resistance vs the Dollar around 131.35, but stalled above 130.50 as Jpy crosses saw more downside on short covering and other factors like weakness in Aud/Jpy in wake of the RBA compounded by safe haven positioning. However, the Buck also bounced broadly due to aversion with the index eventually finding more underlying bids into 105.000, at 105.030 and recovering to 105.710 before fading ahead of US JOLTS, the NY Fed’s household debt and credit report plus a trio of speeches from Evans, Mester and Bullard.

CAD/EUR/CHF/GBP

All softer against the Greenback, albeit to varying degrees as the Loonie straddled 1.2850 and the Franc pivoted 0.9500 on return from respective Canadian and Swiss long holiday weekends, while the Euro topped out fractionally below 1.0300 and still looked technically bearish under recent peaks, a Fib and 1.0250, and Sterling also lost momentum having narrowly missed out on a test of 1.2300 yesterday. Next up for Usd/Cad, Canada’s manufacturing PMI, while Usd/Chf will have taken some note of a deterioration in consumer confidence, slowdown in the manufacturing PMI and weekly sight deposits showing a dip in domestic bank balances.

SCANDI/EM

Notable underperformance in the Nok compared to the Sek and this was probably due to the fact that Brent lost Usd 100brl+ status, but the Try saw no benefit from lower crude prices and the Brl may be hampered by a softer Brazilian IPC-Fipe Inflation Index. Conversely, the Cnh and Cny pared some declines following a slightly firmer than expected PBoC midpoint fix for the onshore Yuan.

02 Aug 2022 - 09:55- Fixed IncomeEconomic Commentary- Source: Newsquawk