EUROPEAN FX UPDATE: Dollar drifts pre-NFP, but Yen bounces briskly before BoJ

Analysis details (10:25)

DXY/JPY

Implied volatility via options remained elevated for Friday’s headline NFP release, but especially lofty for the Usd/Jpy pairing given the BoJ policy announcement earlier in the day and potential for surprise. Indeed, the straddle premium indicated a 230 pip break-even or move in either direction over the two major events, and the run in also saw plenty more price action amidst further Greenback consolidation after its spike on Tuesday post-Powell part one and midweek pullback when the Fed Chair underscored the importance of data as a condition of his more hawkish guidance. Conversely, the Yen recouped losses and reclaimed several technical levels that were breached along the way as it plunged to a new 2023 trough near 138.00 on March 7, including a Fib, daily and hourly moving averages, with Usd/Jpy retracing from 137.27 towards 136.00. Nevertheless, the BoJ is still expected to stand pat at the end of its 2-day meeting and another bumper BLS report will give the FOMC more reason to revert to half point hikes from 25 bp, while plotting higher dots in the upcoming SEP. Prior to all that, Challenger layoffs and initial claims will be in focus and may revive the Buck and index that faded from 105.730 to 105.330.

CHF/AUD/NZD/GBP/EUR   

The Franc also took advantage of its US peer’s downturn and bounced more firmly from sub-0.9400 lows to circa 0.9375, while the Aussie rebounded through 0.6600, the Kiwi beyond 0.6100, the Pound secured a stronger grasp of the 1.1800 handle and the Euro fastened its grip around 1.0550, and all largely without independent impetus. However, Nzd/Usd may have latched on to a strong y/y pick-up in the pace of NZ electronic card retail sales and Aud/Usd could have been cushioned by thawing Australian-Chinese relations, while technical factors were encouraging for Eur/Usd as chart support into 1.0500 continued to hold and Cable was probably thankful that 1.1800 was not seriously tested again.

CAD   

Not much time for the Loonie to dwell on Wednesday’s BoC pause as Canadian jobs data loomed and the spotlight switched to a speech by Rogers on Economic Progress more immediately, but Usd/Cad maintained a higher plane and straddled 1.3800 on the policy divergence dynamic.

SCANDI/EM

The Sek seemed to shrug aside conflicting Swedish macro updates comprising household consumption, industrial production, new manufacturing orders and house prices, but received some protection from broad risk aversion via latest hawkish remarks from the Riksbank. To recap, Bunge said underlying inflation has not shown clear signs of falling, adding it will take time for monetary policy to have full impact, and in a throwback or homage to former ECB President Draghi she pledged to do ‘whatever is necessary’, albeit in context of bringing inflation back down rather than saving the Euro. Elsewhere, the Cnh and Cny coped well with significantly weaker than forecast Chinese CPI metrics, though charts remained aligned to defend the 7.0000 line and the Usd correction clearly assisted as well.

09 Mar 2023 - 10:25- Fixed IncomeData- Source: Newsquawk