EUROPEAN FX UPDATE: Dollar flip-flops following Fed minutes, but holds firm

Analysis details (10:01)

DXY

Buy the rumour and sell the fact seems a bit too convenient or obvious to describe the Greenback’s latest fade, but it’s not the only currency that is not getting the boost one might imagine from supportive Central Bank vibes in the form of guidance and actual policy action in several instances. Indeed, the index only bounced briefly post-FOMC minutes to notch a marginal new y-t-d best at 99.778 before fading again to test support under 99.500, and it could well be that the hawkish tone of the account was already out of the bag given comments from Fed’s Brainard signalling bigger hikes after lift-off and a speedy rundown of the balance sheet on Tuesday. Next up for the Buck, jobless claims and more Fedspeak via Bullard, Evans and Williams.

GBP/CHF/JPY/EUR

Sterling is took advantage of the Dollar downturn and relative Euro underperformance to revisit midweek peaks in Cable just over 1.3100 and fill underlying bids into 0.8300 on the Eur/Gbp cross ahead of remarks from BoE chief economist Pill, while Eur/Usd remains toppy above 1.0900 in advance of ECB minutes amidst a raft of large option expiries (2.4 bn at 1.0900-05, 1.6 bn between 1.0920-25 and 1.7 bn from 1.0930-35) that may now constitute resistance in contrast to decent size interest in the vicinity that appeared supportive yesterday. Note also, the technical backdrop will turn even more bearish for the headline pair if it closes beneath a key Fib retracement level at 1.0895. Elsewhere, the Yen and Franc are benefiting from a retreat in global bond yields more than anything else, like latest BoJ pledges to maintain ultra-easy policy or Swiss jobless rates that matched consensus precisely. Usd/Jpy continues to hover below 124.00 and Usd/Chf above 0.9300, but sub-0.9350.

CAD/NZD/AUD

The Loonie, Kiwi and Aussie shed more of their recent gains in line with retracements in crude and other commodities, while the latter also absorbed downbeat trade data as zero exports resulted in a considerably narrower than forecast surplus. Usd/Cad extended its sharp rebound to 1.2550+, Nzd/Usd retreated through 0.6900 and Aud/Usd under 0.7500 having got close to 1.2400, beyond 0.7000 and over 0.7660 only yesterday. 

SEK/EM

Somewhat perversely, the Sek is back on a firmer footing following Riksbank Floden’s sole contention that rates need to be increased considerably quicker than planned to combat inflation, while the likes of the Pln, Huf and Czk have actually weakened after knee-jerks on tightening moves by the NBP, NBH and CNB, albeit the Forint has EU angst to deal with. Meanwhile, the Rub reversed even more of its post-invasion depreciation even though the conflict continues and more sanctions against Russia are in the pipeline.

07 Apr 2022 - 10:01- Fixed IncomeEconomic Commentary- Source: Newsquawk