EUROPEAN FX UPDATE: Buck fades after pushing recovery envelope pre-NFP

Analysis details (10:32)

DXY

Little time for the dust to settle on latest Fed, BoE and ECB rate hikes given scheduling for the start of February that placed US jobs data on the agenda just two days after the FOMC and only one after its major EU counterparts. However, the Greenback gleaned a bit more traction on further reflection of the respective policy meetings and guidance that was deemed to be dovish overall and to varying degrees. The Dollar index also got a lift via weakness and underperformance in the Loonie, partly on broad risk aversion, soft underlying commodities and ongoing consideration of BoC-Fed rate divergence. The DXY inched a tad closer to 102.000 within a 101.970-580 range before waning and looking for further direction from NFP initially and then the US services ISM.

CAD/AUD/NZD        

As noted above, the Loonie lagged as Usd/Cad continued its rebound from sub-1.3300 and y-t-d lows between 1.3313-74 parameters, while the Aussie suffered some contagion from a Yuan retreat ahead of tech resistance irrespective of another set of encouraging Chinese PMIs, not to mention weaker than forecast housing loans. Aud/Usd drifted down from the high 0.7000 area to probe 0.7050 to the downside and offer Nzd/Usd a prop above 0.6450 via the Aud/Nzd cross that tested bids/support just under 1.0900.

EUR/GBP/JPY/CHF   

All firmer vs their US peer, albeit mildly and relatively restrained in comparison to the volatile price action witnessed over the previous two sessions. The Euro regained 1.0900+ status amidst a sharper retracement in EGBs than USTs or Gilts and hawkish ECB remarks from Kazmir and Simkus rather than marginally firmer than expected Eurozone services and composite PMIs. Conversely, Sterling needed a fillip via upward revisions to the final UK readings having lost hold of the 1.2200 handle and 50 DMA in wake of dovish leanings from BoE’s Pill noting that a lot of policy remains in the pipeline and it is important for the MPC to guard against the possibility of doing too much tightening. Cable recovered to top 1.2250 and Eur/Gbp was capped into 0.8950, while the Yen meandered from 128.82 to 128.45 conscious of yet another pledge to maintain ultra-accommodation by BoJ Governor Kuroda more than impacted. Elsewhere, the Franc straddled 0.9150 and kept afloat of parity against the Euro (narrowly) following another reminder from SNB President Jordan that further hikes cannot be taken off the table and it is willing to be active in currency markets when required.

SCANDI/EM

A dip in Sweden’s services PMI undermined the Sek along with a downturn in risk sentiment, while the Try remained under pressure as Turkish CPI came in above consensus and presented a bump in the road for the CBRT that is banking on price pressures to ease further towards target.

03 Feb 2023 - 10:32- Fixed IncomeEconomic Commentary- Source: Newsquawk