EUROPEAN FX UPDATE: Buck strives to stop the rot pre-Powell

Analysis details (10:02)

DXY

The Dollar and index regained a modicum of composure following Monday’s extended declines on more dovish Fed policy perceptions, but the recovery stalled and the Greenback traded mixed across the board as the DXY hovered just above 103.000 within a tight range (103.040-320 compared to 102.930-103.860 extremes yesterday). In fact, the Buck’s fairly tame bounce was at least partly due to a retracement in the Yuan after a bit of verbal intervention from Chinese officials overnight (state media warning of 2-sided volatility this year), and the next independent impulse will likely come via Fed Chair Powell this afternoon in a speech at an event hosted by Sweden’s Riksbank.

NZD/CHF/EUR/JPY

Marginal gainers vs their US counterpart, with the Kiwi hovering between 0.6400 and 0.6350, the Franc flitting from 0.9224 to 0.9195, the Euro retaining 1.0700+ status to establish a firmer technical platform and the Yen back on the 131.00 handle irrespective of mixed Japanese data in the form of firm Tokyo CPI readings and weak household spending. However, Eur/Usd faced formidable resistance circa 1.0774 from early June last year and fiercer competition on the yield front as US Treasuries retrace from fresh cycle peaks alongside EGBs.

CAD/GBP/AUD

All mildly divergent vs their US rival, as the Loonie traversed 1.3400, Sterling faded just ahead of 1.2200 awaiting comments from BoC and BoE chief Macklem and Bailey at the same Riksbank symposium, and the Aussie pivoted 0.6900 in tandem with the aforementioned Renminbi retreat.

SCANDI/EM

The Sek took a raft of mostly soft Swedish macro releases largely in stride, but the Nok seemed more rattled by sub-forecast headline Norwegian inflation than minor core beats, not to mention a dip in Brent crude. Elsewhere, the Try dipped after Turkish ip missed consensus and the jobless rate remained steady, the Zar reversed through 17.0000 vs the Usd on a combination of consolidation and Gold showing some signs of waning and the Pln did not take too kindly to remarks from NBP’s Kotecki (inflation could approach 20% in February and can’t be sure that the hiking cycle is over).

10 Jan 2023 - 10:02- Fixed IncomeData- Source: Newsquawk