EUROPEAN FX UPDATE: Buck broadly elevated ahead of US inflation data

Analysis details (10:16)

DXY

The Dollar index is still not surging through the 100.000 threshold, but momentum is building and a more decisive break could come on the back of CPI metrics if above consensus as White House officials imply. Alternatively, the Greenback may rally further at the expense of others as technical impulses get increasingly bearish for many of its rivals and the fundamental backdrop favours the Buck given greater contagion from the Russia-Ukraine conflict and COVID-related issues elsewhere. Looking at price action thus far, the DXY peaked at 100.230 having troughed at 99.923 and thereby carving out a firmer range than Monday’s 100.050-99.614 parameters, on top of nudging beyond last Friday’s best (100.190).

AUD/NZD

It’s not obvious or abundantly clear why the Aussie and Kiwi are holding up better than their major peers, but the former certainly drew encouragement from a staunch defence of the psychological 0.7400 level vs its US counterpart and improvements in NAB’s business sentiment and conditions, while the latter is keeping grasp of the 0.6800 handle ahead of the RBNZ that may defy expectations for a 25 bp hike and go 50 bp instead, irrespective of a deterioration in NZIER business confidence. More immediately, Aud/Usd, Nzd/Usd and Aud/Nzd could get near term impetus via NZ food prices and Australian consumer confidence,

GBP/EUR/CAD/JPY/CHF

All succumbing to the US Dollar’s advances, with Cable testing underlying bids/support around 1.3000 in wake of in line or below forecast UK labour data, the Euro hovering just above 1.0850 and a recent low protecting the 2022 base, the Loonie extending its decline under the 200 DMA even though WTI crude has stabilised, but perhaps cushioned by decent option expiry interest at the 1.2650 strike (1.51 bn), plus the proximity of 50 and 100 DMAs (that come in at 1.2662 and 1.2687 today). Note, Eur/Usd hardly reacted to not as bad as feared, but still worse than previous German ZEW economic sentiment and current conditions. Elsewhere, the Yen and Franc are suffering further yield divergence, with Usd/Jpy back up near yesterday’s new multi-year high of 125.77 after a temporary pull-back in response to more Japanese Finance Ministry discomfort about excessive currency moves, and Usd/Chf bouncing from the low 0.9300 zone. 

SCANDI/EM

Some solace for the Nok as Brent reclaims Usd 100+/brl status, while the Mxn also looks content with the firmer tone in oil prices, but the Rub is off recovery highs amidst claims that Russia has used chemical weapons in Ukraine and the Try has not derived much leverage from stronger than anticipated Turkish IP. Conversely, the Czk is underpinned following hawkish-sounding comments from CNB’s Nidetzky to the effect that rates are unlikely to start falling by the end of 2022 as had been envisaged.

12 Apr 2022 - 10:16- ForexData- Source: Newsquawk