EUROPEAN FX UPDATE: Buck bounces broadly, but not uniformly after Presidents’ Day

Analysis details (10:29)

DXY/EUR/GBP

The Dollar derived support from an upturn in US Treasury yields, risk aversion and a loss of momentum in several rival currencies following the long holiday weekend, as the index pivoted 104.000 within a 104.260-103.860 range amidst choppy trade in the Euro on mixed PMI outturns. Eur/Usd popped to the top of a 1.0688-44 range after French prelim readings showed a much stronger than expected services print in stark contrast to manufacturing, but sufficient to push the composite back into expansion, and then faded when the German prints came out significantly less divergent against consensus, albeit still better than expected on balance and echoed in the ensuing pan Eurozone findings, obviously. Conversely, Sterling overcame ongoing NI Protocol concerns as the flash UK PMIs lived up to their name and exceeded forecasts across the board, with Cable breaching a Fib retracement level (1.2092) on the way back up through 1.2100 having slipped below 1.2000 at the other extreme, while the Eur/Gbp cross retreated from the high 0.8800 area towards the round number irrespective of an upbeat German ZEW survey, overall.

NZD/JPY/AUD

Jitters ahead of the RBNZ rather than NZ trade data probably weighed on the Kiwi along with an overall souring in sentiment as geopolitical tensions ramped in various parts, including China and the US plus Russia and the West. Indeed, implied volatility in Nzd/Usd spiked to infer a 65 pip break-even on the policy meeting and the headline pair pulled back from circa 0.6260 to test support into 0.6200 on less certainty over the prospect of a 50 bp hike given the state of emergency caused by Cyclone Gabrielle. Meanwhile, the Yen recoiled from around 134.16 to 134.85 on the UST-JGB divergence dynamic as Japanese PMIs were mixed and the Government maintained its economic assessment for February to note a moderate pick-up, but pockets of weakness, and the Aussie faded within a 0.6920-0.6869 range regardless of hawkish RBA minutes (50 bp hike considered before going 25 bp and no pause contemplated like in December), as Fib resistance was respected (0.6925) and the 50 DMA (0.6892) probed.

CAD/CHF    

The Loonie meandered from 1.3492 to 1.3442 against the Greenback awaiting Canadian CPI and the Franc straddled 0.9250 in wake of a significantly wider Swiss trade surplus boosted by faster watch exports.

SCANDI/EM

Marked outperformance in the Sek due to hawkish comments from Riksbank’s Floden (see 8.31GMT post on the Headline Feed for details) that overshadowed declines in Swedish money market inflation expectations, as it peered over 11.0000 vs the Eur, but the Zar was undermined by more widespread Eskom power problems as the SA utility suffered multiple generation unit breakdowns over the weekend that forced it to implement stage 6 load-shedding until further notice. Elsewhere, the Cny and Cnh endured further Chinese-US angst and both slipped closer to pivotal 200 DMA supports against the Usd.

21 Feb 2023 - 10:29- ForexResearch Sheet- Source: Newsquawk