EUROPEAN FX UPDATE: Dollar back on a firmer footing pre-US CPI

Analysis details (09:58)

DXY

Renewed risk aversion gave the flagging Greenback a boost before US inflation data rather than reports of a leak showing a blow-out headline number that the BLS was quick to denounce as fake news. The index reclaimed 108.000+ status, albeit remained rangy between 108.020-390 parameters in line with Usd/major pairings in advance of CPI that could well be the next big driver in terms of providing direction and further clarity over the near term Fed policy outlook.

CHF/AUD

A somewhat unusual duo heading the G10 ranks, but the Franc forged gains on safe haven grounds vs the Buck and Euro to trade above 0.9800 and 0.9850 respectively, while the Aussie appeared to appreciate a partial recovery in base metals and a rebound in the Aud/Nzd cross from the low 1.1000 area in wake of the RBNZ rate meeting overnight, as Aud/Usd consolidated mostly above 0.6750 awaiting independent impetus from the labour market report on Thursday.

GBP/NZD

Sterling derived some traction from better than expected UK GDP data and BoE Governor Bailey stating that the MPC has more options other than 25 bp hikes, though failed to sustain momentum towards 1.1950 against its US peer, in contrast to breaching 100 and 200 DMAs vs the Euro. However, the Kiwi gleaned little from the RBNZ beyond the widely anticipated 50 bp hike as it maintained guidance and the prior projected path for the OCR to leave Nzd/Usd hovering within a 0.6143-05 range.

CAD/EUR/JPY

The Loonie will be hoping for leverage and protection from crude-related losses via the BoC later as a 75 bp rate rise is forecast alongside hawkish guidance, but may be hampered by hefty Usd/Cad option expiry interest bang on the 1.3000 mark until the NY cut when 1.57 bn rolls off. Elsewhere, the Euro is still defending parity against its US peer, but the Yen has not held 137.00 amidst rebounding US Treasury yields pre-CPI and post-poor 10 year note auction.

SCANDI/EM  

Perversely perhaps, the Nok seemed happier with Brent climbing back above Usd 100/brl than the Sek to see Swedish money market inflation expectations rise even though the latter is likely to harden the Riksbank’s resolve to tighten further. Meanwhile, the Cnh and Cny pared some losses with aid of an above consensus Chinese trade surplus and latest PBoC pledge to step up support for the real economy, and the Czk was underpinned by firmer than forecast Czech CPI readings.

13 Jul 2022 - 09:58- Fixed IncomeData- Source: Newsquawk