EUROPEAN FX UPDATE: commodity vs risk divergence dynamic continues

Analysis details (10:19)

DXY

The Dollar remains the default and dominant choice when sentiment is deteriorating and riskier assets are being flogged, but the Greenback is not universally bid in the current climate where crude oil and other commodities are soaring due to sanctions against Russia that are squeezing already tight supply pipelines. However, the index is hovering around 99.000 after extending its rally to 99.238 in wake of, if not due to Friday’s bumper US payrolls print amidst even stronger gains against almost all basket components and further appreciation vs EM currencies. Note also, net long spec positioning was trimmed again last week to put the Buck in better stead to climb as a safe haven and in its role as the primary global reserve.

NZD/AUD   

It is still touch and go down under in terms of Aussie and Kiwi rivalry as the Aud/Nzd cross pivots 1.0750 and the Antipodeans vie for supremacy on commodity grounds, though both are making further advances relative to their US counterpart, with Aud/Usd up through 0.7400 and Nzd/Usd probing 0.6900 before losing momentum.

CAD/NOK

No surprise whatsoever that the Loonie and Norwegian Krona and benefiting from WTI and Brent strength respectively, albeit to varying degrees as the former also has to contend with its rampant US rival either side of the 1.2700 handle, while broad or nearly outright Euro weakness is making the latter’s life even easier. Usd/Cad is currently just over the round number and Eur/Nok sub-9.8000 having been as low as 9.7200 or so at one stage.

JPY/CHF/XAU

The other refuges in a storm are not having it all their own way as technical impulses and a rebound in US Treasury yields is keeping the Yen tethered around 115.00, while the Franc has taken heed of latest SNB verbal intervention (see Headline Feed at 8.42GMT) to the extent that Usd/Chf is back up near 0.9250 compared circa 0.9162 overnight and Eur/Chf has bounced from towards 1.0050 from 0.9973 or so. Conversely, Gold is holding close to Usd 2000/oz alongside other highly precious and sought after metals.

SEK/EUR/GBP     

With no oil buffer and the Riksbank behind the ECB in monetary policy terms, the Swedish Crown continues to fall and is now approaching 10.9000 vs the Euro irrespective of the single unit’s aforementioned travails elsewhere. Indeed, Eur/Usd is struggling to recover from the low 1.0800 area and Eur/Gbp is capped between 0.8265-0.8203 parameters regardless of Cable’s inability to stay above 1.3200.

EM

Very choppy waters and few winners as war takes a bigger toll on the Rub, Try, Inr, Huf, Czk and Pln, to name just a few, but the Cnh and Cny are still resilient on regional safety grounds and upbeat Chinese trade data to offset the NPC setting the lowest GDP target in three decades, at 5.5% approximately. Elsewhere, some solace for the Zar too thanks to the rally in Gold noted earlier.

07 Mar 2022 - 10:19- Fixed IncomeData- Source: newsquawk