EUROPEAN FX UPDATE: clearish divide along risk-off/on lines

Analysis details (10:27)

DXY

More volatility, but a bit less sporadic or random price action and disorderly moves as the new month and quarter kicks off, with the Buck regaining momentum after losing its rebalancing bid amidst a pronounced retreat in US Treasury yields yesterday. However, the Dollar index has slipped into a lower and tighter range around 105.000 that has become a focal point, if not pivot, with upside resistance ahead of the 2022 peak still capping gains ahead of the manufacturing ISM and construction spending before an early close in some markets for the long Independence Day holiday weekend. The DXY is flitting between 105.120 and 104.750 compared to 105.540-104.640 extremes on Thursday, though the Greenback is ahead against all components, aside from the Yen, and extending to fresh y-t-d highs vs other G10 rivals.

JPY  

As noted above, the Yen is bucking the overall trend, but well off best levels as global bonds retreat from new safe haven/recovery highs and Usd/Jpy bounced from around 134.74 to circa 135.50 to leave Fib support at 134.49 intact.

AUD/NZD

A partial improvement in risk sentiment and another encouraging Chinese PMI failed to revive Aussie or Kiwi fortunes much, as Aud/Usd hit a new 2022 low sub-0.6800 and Nzd/Usd tumbled to circa 0.6164 irrespective of upturns in Australian manufacturing PMIs and mixed NZ macro news via building consents and ANZ consumer confidence (former much less contractionary, but latter down from the previous month).

EUR/CAD/CHF/GBP  

The Euro may have derived some encouragement from firmer than forecast or preliminary Eurozone manufacturing PMIs and mostly stronger than expected inflation metrics, but having reclaimed 1.0400+ status vs the Buck and 0.8600 against Sterling, Eur/Usd faded on approach to 1.0500 and Eur/Gbp pre-0.8650 even though the Pound underperformed and lost grip of 1.2100 in Cable terms. Moreover, a downward revision to the UK manufacturing PMI and weaker than expected BoE consumer credit offset beats in mortgage lending and approvals. Elsewhere, the Loonie gleaned a bit of traction from WTI clawing back over Usd 3/brl from Usd 104.56 as it straddled 1.2900 and the Franc held just above 0.9600 within a 0.9597-42 band in wake of a sturdy Swiss manufacturing PMI.

SCANDI/EM

In contrast to the above, Sweden’s manufacturing PMI slowed to offer the Sek no support and the Nok did not derive much from Brent’s bounce to Usd 111.34 from Usd 108.03 or an uptick in the Norwegian manufacturing PMI. Similar story for the Cny and Cnh regardless of China’s Caixin manufacturing PMI returning to expansionary territory and posting its best print since May last year, while the Zar fell with Gold as Usd 1800/oz gave way, but the Czk remained relatively resilient considering that CNB’s Holub advocated a smaller hike this month and the Czech manufacturing PMI slumped below 50.

01 Jul 2022 - 10:27- ForexData- Source: Newsquawk