EUROPEAN FX UPDATE: Buck back on a firmer footing as rates soar and risk sours

Analysis details (09:56)

DXY

Having peaked around 105.000 and troughed near the round number below in whippy trading conditions on the first day of March, the Dollar and index settled into a tighter 10.4330-810 range, albeit better bid on balance as the 10 year US Treasury yield rebounded a bit further beyond the psychological 4% level and broad sentiment turned more bearish or hawkish. However, the DXY remained capped as several Greenback/major pairings respected significant chart and sentimental marks ahead of the latest IJC updates and more Fed commentary courtesy of renowned hawks Waller and Kashkari.

NZD/AUD

Some payback for the Kiwi irrespective of NZ’s much better than expected Q4 terms of trade and mixed import/export price data vs consensus, as Nzd/Usd unwound gains between 0.6263-12 parameters and the Aud/Nzd cross maintained 1.0800+ status regardless of Aud/Usd fading around the 0.6750 axis in wake of Aussie building approvals falling well short of consensus.

EUR/CHF/GBP/JPY/CAD

All making way as the Buck bounced broadly, with the Euro pivoting 1.0650 and underpinned by ongoing EGB weakness rather than remarks from ECB’s Lagarde reaffirming guidance for a 50 bp hike later this month in advance of minutes from February’s policy meeting minutes that are due for release alongside a speech by Schnabel. Prior to all that, prelim Eurozone inflation looms and could well provide Eur/Usd with more impetus. Meanwhile, the Franc retreated through 0.9400 towards 90.9450 and the Pound straddled 1.2000 amidst softer DMP inflation expectations and a negative assessment of the new NI Protocol deal based on the DUP’s seven tests. Elsewhere, the Yen managed to keep afloat of 137.00 again even though BoJ sources echoed the message from Board member Takata that the effects of December's YCC tweak need to be assessed further before any more adjustment, and the Loonie rotated either side of 1.3600 with an eye on WTI (firmer within tight Usd 78.27-77.23/brl confines) in the absence of anything Canada-specific.

SCANDI/EM

Another lurch lower for the Sek and Nok due to waning risk appetite and bearish technical impulses, while the Cnh and Cny lost some of their Chinese PMI inspired midweek euphoria to the detriment of other EM currencies and the Czk failed to glean momentum from CNB Vice Governor Frait stating that it is not possible to rule out the need for further policy tightening, and that could take the form of hikes or via the FX route.

02 Mar 2023 - 09:56- Fixed IncomeData- Source: Newsquawk