EUROPEAN FX UPDATE: Buck extends retreat to the benefit of most others

Analysis details (09:53)

DXY

Having gleaned very little upside impetus from Friday’s largely stronger than expected US jobs data, the Greenback continued to gravitate amidst ongoing uncertainty over the debt ceiling and with no real help from Fed speakers Goolsbee or Bullard. To recap, the former said it is way too premature to expect a rate hike in June and they have to keep an eye on credit conditions, which is doing the work of monetary policy, while the latter is ready to be data dependent with an open mind on whether to pause or hike at the June meeting, albeit retaining his hawkish leanings by adding that he thinks the Fed will ultimately have to grind higher on rates due forecasts for a slower decline in US inflation compared to elsewhere. Regardless, the Dollar index drifted down from 101.330 to 101.040 in the run up to Employment Trends, the Fed’s Senior Loan Officer Survey and NY Fed Survey of Consumer Expectations, with focus on the latest inflation projections.

AUD/NZD

The high betas remained most responsive to the Buck’s fragility, but the Aussie also saw an uptick in NAB business confidence to offset slower business conditions and a dip in building approvals, while taking on board confirmation from Treasurer Chalmers that an energy rebate of up to Aud 500 for millions of Australians will be unveiled in Tuesday’s budget. Aud/Usd rebounded from sub-0.6750 to peer over the 100 DMA at 0.6789 and the Kiwi followed suit as Nzd/Usd bounced from under 0.6300 to 0.6330 ahead of NZ electronic card retail sales and the Aud/Nzd cross held within a relatively contained 1.0737-03 range.

CHF/EUR/CAD/GBP

All on the front foot against their US counterpart, albeit to varying degrees. The Franc recouped a chunk of its post-Swiss CPI losses and reclaimed 0.8900+ status, the Euro probed 1.1050 from the low 1.1000 area as EGB yields rebound relatively firmly, the Loonie maintained its bullish Canadian LFS momentum between 1.3349-88 parameters with some encouragement from comparative stability in crude oil and Sterling retained a firm grasp of the 1.2600 handle on UK Coronation Day holiday Monday. Note, Eur/Usd shrugged off the latest ECB survey of monetary analysts and May’s Eurozone Sentix index, even though the latter was considerably weaker than forecast.

JPY

The Yen underperformed after Japanese markets reopened from last week’s Golden Week break and Treasuries fell in sympathy with their Eurozone peers. Usd/Jpy rallied from 134.66 to 135.29, irrespective of upward revisions to final services and composite PMIs.

SCANDI/EM

Brent’s recovery from Usd 74.95/brl to Usd 76.75 at best gave the Nok more incentive to claw back recent losses, while the Zar took mixed SA Gold and FX reserve balances in stride against the backdrop of bullion consolidating within a Usd 2025-2014/oz band and recouped declines vs the Usd, and the Cny/Cnh were underpinned following a meeting between Chinese Foreign Minister Qin and the US ambassador to Beijing where the former said it is imperative to stabilise Sino-US relations, avoid a downward spiral and prevent accidents between China and the US.

08 May 2023 - 09:53- Fixed IncomeData- Source: Newsquawk