EUROPEAN FX UPDATE: Buck mixed amidst recovery in risk and yield retracement

Analysis details (10:14)

DXY

Stocks look set to claw back a chunk of their recent heavy losses and regain composure in the somewhat less bearish/hawkish rate environment, as bonds bounce from deeper cycle lows. However, risk sentiment remains very fluid and fragile amidst ongoing threats to the global economy and the Dollar retains a firm underlying bid as the prime safe-haven, with the index holding around 103.500 and above Monday’s trough within a 103.490-770 range ahead of another slew of Fed speakers including Fed's Williams, Waller, Bostic, Barkin, Kashkari, and Mester.

CHF/EUR/JPY

Also taking advantage of softer US Treasury yields, the Franc has pared declines from sub-0.9950 vs the Greenback, the Euro from just under 1.0500 at one stage yesterday and the Yen is consolidating around 130.00 having hit a new 2022 low at 131.35 on Monday, with some leverage from stronger than expected Japanese household spending data overnight, whilst BoJ's Uchida dismissed the prospects of a tweak to the BoJ’s 50bps yield target band. The single currency meanwhile was unfazed by the mixed German ZEW metrics, with Eur/Usd stil around the middle of a 1.0551-1.0585 intraday range thus far, with ECB’s de Guindos still on the docket.

CAD/NOK/AUD/NZD

The crude and commodity bloc have gleaned a degree of traction from partial recoveries or stabilisation in underlying prices, but are still wary and tentative as the Loonie straddles 1.3000 against its US rival with little sign of influence from mega option expiry interest below (3.34 bn at the 1.2935 strike), and the Norwegian Crown pivots 10.2200 vs the Euro even though headline CPI came in much higher than forecast and the Norges Bank’s own estimate, while core inflation also beat consensus. Elsewhere, the Aussie extended its reversal from 0.7000+ against its US peer and through 1.1000 vs the Kiwi before finding bids into 0.6900 and under the round number respectively in wake of firmer than anticipated retail sales and a mixed NAB business survey showing an improvement in conditions, but drop in confidence. Meanwhile, Nzd/Usd is hovering in the low 0.6300 zone following a rebound in electronic card spending.

GBP

Sterling looks somewhat bereft of independent inspiration and contingent on external direction/developments as Cable rotates either side of 1.2350 awaiting Brexit news, further political fallout and more comments from BoE hawk Saunders.

EM

Hot inflation prints should keep the CNB and NBH in hike mode to the relative benefit of the Czk and Huf, but the Try continues its slide irrespective of the CBRT and Turkish regulator asking banks to conduct FX transactions with corporate clients between hours that are deemed more liquid, according to Reuters citing bankers.

10 May 2022 - 10:13- Fixed IncomeData- Source: Newsquawk