EUROPEAN FX UPDATE: Dollar drifts as yields slip from midweek peaks

Analysis details (10:32)

DXY

Some payback after the Buck’s exertions on Wednesday when US data exceeded expectations with only one exception (industrial production), and retail sales were especially exuberant. The index extended its recovery gains to top 104.000 at one stage, but failed to sustain momentum on the handle before pulling back to ‘close’ just under the round number and then retreated further between 103.890-520 parameters amidst some consolidation in Treasuries that tumbled to new cycle lows on hawkish Fed rate pricing. However, the Greenback retained an underlying bid ahead of producer prices, jobless claims, the Philly Fed, housing starts, building permits and several Fed speakers, including Mester (twice), Bullard and Cook.

AUD/GBP/NZD/JPY

The Aussie managed to reclaim 0.6900+ status and rebound through 1.1000 vs its US and NZ counterparts respectively even though the latest labour market report disappointed, as payrolls fell again against consensus, the jobless rate, participation dipped and full time jobs dropped over 40k. On the flip-side, risk sentiment was supportive and the Kiwi continued to suffer cyclone after-effects with Nzd/Usd heavy on the 0.6300 handle and Kiwibank calling on the RNBZ to pause its tightening cycle given the national state of emergency. Elsewhere, Sterling regrouped after its post-UK CPI collapse and the Yen clawed back losses on yield considerations rather than Japanese trade data that was somewhat mixed (deficit not quite as wide as feared, but still biggest ever, exports stronger than forecast and imports a tad below) or sub-consensus machinery orders. Cable bounced firmly from 1.2015 to 1.2074, at best and Usd/Jpy reversed from 134.17 to 133.61 before stalling.

CAD/EUR/CHF

Speeches from BoC Governor Macklem and Beaudry loom, but in the interim the Loonie also took advantage of its US rival’s downturn to test offers into 1.3350 compared  to a low just shy of 1.3400, while the Euro got to within a whisker of the 10 DMA (1.0724 today) before waning and was hardly helped by dovish comments from ECB’s Panetta (should not unconditionally pre-commit to future policy moves, extent and duration of monetary policy restriction matters now that rates are in restrictive territory and cost of going too high with rates could be higher in the Eurozone than US due to former’s economic structure). Meanwhile, the Franc largely tracked moves in peer currencies as Usd/Chf held in the bottom half of a 0.9300-0.9200 range and Eur/Chf sat tight beneath 0.9900.  

SCANDI/EM

Not much independent impetus for the Sek from pretty standard remarks from Riksbank’s Jansson, even though he talked the Krona up, and the same goes for the Nok in context of increases in Norwegian oil investment projections for this year and next. Conversely, the Pln did not have time to glean impetus from a hawkish NBP Tyrowicz as the ECJ’s Advocate General in the Polish FX Mortgage case said banks may not demand remuneration for use of capital in contracts rendered invalid, while the possibility of demanding remuneration from banks by consumers should be based on Polish law, and the Cny/Cnh were undermined by more China-US antagonism after the Commerce Ministry announced that it will include Lockheed Martin (LMT) and Raytheon (RTX) on the unreliable entities list from today, banning the companies from engaging in China-related trade activities.

16 Feb 2023 - 10:32- Fixed IncomeData- Source: Newsquawk