EUROPEAN FX UPDATE: Buck perks up ahead of US PCE data

Analysis details (10:08)

DXY/JPY

Notwithstanding moves in other Dollar/G10 pairings, the Greenback and Yen remained inextricably linked approaching the end of March, Q1 and Japan’s FY, as Usd/Jpy extended its bull run to circa 133.59 at one stage from around 129.64 only a week ago. This went against rebalancing models flagging a moderate sell signal and defied convention or the customary Yen appreciation on repatriation needs seen when month end coincides with the last day of the first quarter and final one of the fiscal year. Japanese importers were actively hedging over the Tokyo fixes again overnight, while ‘special’ RHS orders continued to be cited amidst ongoing speculation about M&A related flows or Usd/Jpy buying for investment in Q2, and this all helped the index defend 102.000, albeit narrowly within a 102.040-480 range ahead of US PCE, Chicago PMI and a full quota of Fed speakers.

AUD/NZD

The Aussie suffered another fall from grace as risk sentiment faded and post-Chinese PMI gains were eroded/reversed from a loftier 0.6700+ peak vs the Buck, but the Aud/Nzd cross also retreated through 1.0700 to the relative benefit of the Kiwi against its US rival on positioning for the RBA and RBNZ policy meetings next week. In short, the former is expected to consider a pause, while the latter is seen downsizing to a 25 bp hike with an outside chance of another half point, and this kept Nzd/Usd propped between 0.6248-97 parameters.

CHF/EUR/CAD/GBP

All making was for their US peer’s latest and partial/mini revival, with the Franc back below 0.9150 from a virtual double top near 0.9125, the Euro losing grip of the 1.0900 handle having formed a twin peak as well, around 1.0925, the Loonie waning not far from the psychological 1.3500 level and Sterling unable to sustain 1.2400+ status even with impetus from UK Q4 GDP upgrades in the final reckoning, a much narrower than forecast current account deficit and relatively upbeat Lloyds business barometer. Note, Eur/Usd remained depressed post-Eurozone inflation data as the headline was softer than forecast and core measures in line.

SCANDI/EM  

The Nok bounced from just under 11.4000 vs the Eur after an unexpected dip in Norway’s registered unemployment rate and the Norges Bank announced that it would buy less foreign currency in April vs the current month, while the Cnh and Cny got a boost from the aforementioned better than consensus Chinese PMIs plus the PBoC’s even bigger liquidity injection to offset growing China-US angst.

31 Mar 2023 - 10:08- Fixed IncomeData- Source: Newsquawk