EUROPEAN FX UPDATE: Buck on brink of bigger breakdown before US data dump

Analysis details (10:05)

DXY

The Dollar and index came under renewed pressure as the clock ticked down to a raft of primary US macro releases and Friday’s closely watched PCE price metrics in context of gauging inflation developments from a Fed policy perspective. However, the DXY defended the semi-psychological 101.500 level and regrouped, as several Greenback/G10 and other pairings held, respected or rejected significant markers of their own, and the index managed to close the gap to Wednesday’s last trading price with a bounce to 101.850. Nevertheless, the DXY may yet feel the weight of rebalancing flows for month end next Tuesday as one bank model suggests selling vs all major rivals, bar the Norwegian Krona.  

NZD/AUD

Hot (to varying degrees) inflation reports helped the Kiwi and Aussie maintain bullish momentum and the former also clawed back some losses via the Aud/Nzd cross as 1.1000 represented a formidable barrier, but Nzd/Usd faded just over 0.6500 again and Aud/Usd remained capped ahead of a pinnacle from August 2022 around 0.7136.

JPY/CHF/CAD/GBP/EUR  

The Yen ran into resistance only pips away from 129.00 against the Buck and may have taken more heed of verbal intervention via Japan’s chief currency official (sharp moves will not be tolerated) than the SOO from January’s BoJ policy meeting that highlighted divergence on the outlook for inflation and wages. Usd/Jpy subsequently approached 130.00 before a report from the IMF advocating more YCC flexibility, and it was a similar story elsewhere as the Franc retreated towards 0.9200 from sub-0.9165, the Loonie through 1.3400 from 1.3370, Sterling to 1.2374 from circa 1.2430 and the Euro to 1.0893 from 1.0929 or so.

SCANDI/EM

Divergence between the Nok and Sek regardless of a jump in Norway’s LFS jobless rate and mostly downbeat Swedish sentiment indicators (consumer confidence aside), with the former outperforming in wake of DNB revising its forecast for the Norges Bank to pencil 25 bp hikes on both March and June. Meanwhile, the Cnh got a boost as HK markets returned from holiday and rallied on Covid reopening hype, some traction from the Try as the CBRT removed the ceiling for Lira interest rate deposits and announced support for the conversion of firms' foreign exchange obtained from abroad into Try to support 'liraization' in commercial activities, with firms to be given 2% of the amount converted. The Zar traded on a firmer footing, irrespective of weaker than consensus SA PPI, but could yet be undermined by the SARB if it does not deliver the 50 bp hike widely anticipated.

26 Jan 2023 - 10:05- Fixed IncomeData- Source: Newsquawk