EUROPEAN FX UPDATE: Dollar on a firmer footing on Fed vibes and Russian jibes

Analysis details (09:45)

DXY

The Buck retains an underlying bid amidst heightened expectations that US rates are on course to be raised more aggressively and probably to a loftier peak than signalled in the latest set of SEP dot plots. However, it remains far from a direct link or straight line correlation given bouts of positional adjustment in a market already long in spec terms, while the Greenback also faces stiff competition from higher yielders and currencies backed by those commodities that have been squeezed most by the Russia-Ukraine conflict. Nevertheless, the Dollar is still the global reserve and ultimate safe-haven, so in demand during periods of risk aversion or less appetite, like the recent wobble when Russian Foreign Minister Lavrov launched his latest broadsides against NATO and the EU. Hence, the index looks more assured around the 98.500 mark within a 98.704-385 range ahead of US housing data, further remarks from Fed’s Daly and Usd 16 bn 20 year T-note supply.

GBP

Sterling only got a fleeting fillip from stronger than forecast UK inflation readings and could have fallen prey to psychological resistance given the Pound’s failure to breach 1.3300 vs the Buck or sustain momentum through 0.8300 against the Euro. Moreover, buyers may be wary and bulls keeping their powder dry for what Chancellor Sunak has in his red case to be unveiled during the Spring Statement from 12.30GMT rather than commentary from Governor Bailey at the BIS Summit half an hour earlier.

NZD/CHF

Having forged more than others from the relative frailty of its US rival yesterday, the Kiwi has lost altitude from around 0.6975 irrespective of NZ PM Ardern announcing a rise in indoor gathering limits to 200 and the removal of outdoor limits altogether with effect March 25. Meanwhile, the Franc is testing support circa 0.9350 and 1.0300 vs the Euro T-1 to the SNB with little reaction to upward revisions to SECO’s Swiss CPI projections.

JPY/CAD/EUR

The Yen has actually recovered pretty well, all things considered, though not before suffering another hefty sell-off that saw Usd/Jpy reach 121.41 or so alongside big advances in Jpy crosses, but stale BoJ minutes from the January policy meeting out tonight will no doubt underline divergence and Japan’s preliminary manufacturing PMI looks prone for a slowdown. Elsewhere, the Loonie is hovering just above 1.2600 vs its US counterpart as WTI holds firm between Usd 111.35-108.38/brl parameters, but the Euro is waning on the 1.1000 handle again as EGB yields retreat quite notably from highs.

AUD

Bucking the overall softer trend against the Greenback, the Aussie is eyeing 0.7500 next after scaling several technical hurdles in the run up to flash PMIs, but a Fib at 0.7487 may stall upside progress (50% retrace of the fall from 0.8007 to 0.6967).

SCANDI/EM

Although broad risk sentiment is flagging, the Sek is deriving impetus from another Riksbank member coming round to the fact that action to tackle inflation may be required sooner rather than later - see 8.17GMT post on the Headline Feed for comments from Bremen, while the Czk is responding positively to hawkish guidance from CNB’s Moura who contends that rates may peak well beyond 5% compared to 4.5% currently.

23 Mar 2022 - 09:45- Fixed IncomeData- Source: Newsquawk