EUROPEAN FX UPDATE: Dollar continues to retreat from multi-year peaks

Analysis details (10:26)

DXY

The Buck backed off further on a combination of long liquidation, profit taking and safe haven unwinding, with the index losing momentum below 108.000 within a 107.960-360 range compared to last Friday’s 108.720-107.900 extremes and the new 109.290 y-t-d/20 year best registered earlier in the week when hot US inflation data sparked a rise in Fed tightening expectations to circa 75% for 100 bp for July’s FOMC. However, two of the more hawkish officials subsequently pushed back against overdone pricing and advocated another 75 bp hike instead and this view is shared by an opinion piece in the WSJ to the detriment of the Greenback and benefit of others.

GBP/AUD

No particular catalyst, but the Pound gained a bit more than fellow G10 rivals at its US peer’s expense ahead of a busy week on the UK front in terms of data and events, as Cable rebounded around 100 pips from lows circa 1.1863 and Eur/Gbp retreated after a minor 0.8500+ pop even before hawkish-leaning commentary from BoE’s Saunders - see 10.00BST post on the Headline Feed for details. Meanwhile, the Aussie reclaimed 0.6800+ status and 1.1050+ against its Antipodean counterpart with the aid of a bounce in iron ore prices and irrespective of stronger than forecast NZ CPI metrics that were somewhat overshadowed by the RBNZ introducing a new standing repo facility for Nzd loans at a 15 bp discount to the OCR with effect from Wednesday. 

EUR/NZD/CAD/JPY

All firmer vs the Buck and pretty much on an even keel, with the Euro eyeing 1.0150, the Kiwi hovering under 0.6200, the Loonie straddling 1.3000 after comments from BoC Governor Macklem an 8% handle on Canadian CPI that is due for release next week, and the Yen probing 138.00 from a sub-138.50 base.

CHF

Somewhat surprisingly perhaps, the Franc lagged regardless of a report suggesting that the SNB will likely raise rates by another 50 bp ‘at least’ in September, and Usd/Chf was probably propped around 0.9750 alongside Eur/Chf between 0.9838-98 parameters in recognition of an increase in weekly Swiss sight deposit balances at domestic banks.  

EM

More worrying news for the Try as Turkey’s budget balance swung from surplus to deficit in June, but the Cnh and Cny got some respite from another jump in Chinese Covid cases via PBoC Governor Yi reiterating that the Central Bank will increase the implementation of prudent monetary policy to provide stronger support for the real economy, and the Czk was underpinned following remarks from CNB’s Dedek about it being appropriate to use FX intervention to prevent the Crown from weakening and the aim is not to strengthen the currency, and adding that the country is far from the point that it would start to feel reserves are getting dangerously low. On that note, the HKMA bought more Hkds to keep in pegged against the Usd.

18 Jul 2022 - 10:26- Fixed IncomeData- Source: Newsquawk