EUROPEAN FX UPDATE: Buck labours ahead of key BLS release

Analysis details (09:55)

DXY

Latest comments from Fed’s Harker were arguably more dovish if taken verbatim as he said the FOMC is close to the point where it can hold interest rates in place and is closely monitoring data to assess whether additional policy tightening will be needed, adding that the Fed doesn't have to keep tightening and he thinks it should ‘at least’ skip hiking in June. Meanwhile, the US debt ceiling deal sailed through the Senate by a 63 vs 36 vote on the way to President Biden’s desk for signing to remove any lingering default risk and give overall risk sentiment a boost. Next up for the Greenback and its peers, NFP and the usual knee-jerk reactions to headline payrolls, the jobless rate and average earnings, as the Dollar index drifted down into a lower range around 103.500 (103.590-390) and just above various props including a Fib retracement level (103.300), recent lows (103.350 and 103.160) and the 21 DMA (at 103.020 today). For a detailed preview of the latest monthly employment report check out the Research Suite of the website.

AUD/NZD/CAD

The Aussie extended its impressive comeback to top 0.6600 vs the Buck and 1.0850 against the Kiwi on the back of a bounce in base metals, another bank lifting its peak RBA rate view (ANZ to 4.35% from 4.1% previously) and the Fair Work Commission raising the minimum wage by 5.75%, while Nzd/Usd ran out of impetus just above 0.6100 in wake of weaker than forecast NZ terms of trade, import and export prices. Elsewhere, the Loonie drew some support from a rebound in crude in advance of OPEC+ on Sunday even though no change in production is envisaged, with Usd/Cad eyeing 1.3400 from circa 1.3452.

CHF/GBP/EUR   

All firmer vs the Greenback and largely thanks to their rival’s ongoing retreat from midweek peaks as the Franc pivoted 0.9050, the Pound formed a base on the 1.2500 handle and the Euro held firmly ‘comfortably’ above 1.0750 following latest somewhat contrasting ECB remarks (Vasle stressing that core inflation remains high and persistent, so further rate hikes needed to reach the goal of 2%, and Panetta advising against tightening too hastily as the terminal level approaches).

JPY

Firmer Treasury yields in comparison to JGBs thwarted another Yen revival against the Dollar, but Usd/Jpy also took on board yet more dovish guidance from BoJ Governor Ueda on the way from 138.61 to 139.10. To recap, he maintained that massive monetary easing is appropriate as it will take more time to achieve the price target, while premature tightening could hurt companies even in good health and may weaken Japan’s economic potential.

SCANDI/EM

Much needed respite for the Sek and Nok as a narrower Swedish current account surplus only came in context of a healthy revision to the prior month, while Norway’s registered unemployment rate dipped to supplement Brent trading more stably between Usd 75.26-74.18/brl bounds. Similar story for most EM currencies that benefited from a broadly weaker Usd, bar the Try due to ongoing Turkish political, fiscal, economic and wider issues.

02 Jun 2023 - 09:55- Fixed IncomeData- Source: Newsquawk