EUROPEAN FX UPDATE: Dollar in demand and Yen in remission as risk is shunned

Analysis details (10:15)

DXY/JPY

The latest and more pronounced bouts of risk aversion have shifted the dynamic somewhat for the Buck that is still bid even though US Treasury yields are backing off and the curve is re-steepening. Indeed, the index saw stops triggered on a breach of 101.500 to hit a new 101.750 y-t-d peak amidst broad Greenback gains against its basket components, but not the Yen in this instance irrespective of a Japanese MoF official denying reports that joint currency intervention has been discussed with the US. Usd/Jpy tested bids/underlying support around 128.00 compared to overnight session highs circa 128.86, as the BoJ continued its unlimited JGB buying to maintain YCC.

AUD/GBP/EUR/NZD

Holiday-thinned volumes no doubt hampered the Aussie, but the fact that it got hit much harder than the Kiwi on Anzac Day highlights its closer correlation with commodities and China from a trade partnership perspective. Hence, as the likes of iron ore and copper tanked along with the Yuan, Aud/Usd slumped to 0.7150 before finding its feet, while Nzd/Usd was cushioned by Aus/Nzd tailwinds and has bounced firmly from just under 0.6600 as the cross reverses sharply from 1.0940 to sub-1.0850. Elsewhere, Sterling is floundering after falling through a Fib retracement circa 1.2830 vs its US counterpart and 0.8400 against the Euro that gleaned some traction when it fended off offers into 1.0700 and got a further fillip from unexpected rises in all Ifo survey metrics to lift Eur/Usd back up to 1.0750 or so. 

CHF/CAD  

The Franc is trying keep its head above 0.9600 in relation to its US peer and pair losses following a spike to just shy of 1.0350 vs the Euro when the second round vote in France’s Presidential election confirmed victory for Macron over Le Pen and Eur/Usd jumped to around 1.0840. However, it is only partially back in favour as a safe haven and conscious that the SNB is still present via a rise in Swiss sight deposit balances at domestic banks. The Loonie is also striving to contain declines vs its US rival, through 1.2750 in the face of steep reversals in oil prices and awaiting testimony from BoC's Macklem and Rogers at a Finance Committee.

SCANDI/EM

Brent’s retracement and the aforementioned bearish market mood are weighing on the Nok, but it is actually holding up better than the Sek in the run up to Thursday’s Riksbank policy meeting in what could be seen as a sign of some hawkish chips being taken off the table. Meanwhile, the Cnh and Cny have both hit fresh lows off a weaker PBoC fix as the latest spread of Covid cases mounts and reaches the Chaoyang district of Beijing. Conversely, some rare good news for the Try as Turkish manufacturing confidence improved in April and supportive words for the Pln as Poland’s PM pledged to keep the Zloty adequately strong.

25 Apr 2022 - 10:15- Fixed IncomeResearch Sheet- Source: Newswires