EUROPEAN FX UPDATE: Dollar pops then drops after Fed plots more dots

Analysis details (09:46)

DXY

Not much, and only short-lived bang for the Buck even though the FOMC policy event was hawkish in virtually every aspect, bar refraining from a larger lift-off. To recap, the Fed is now signalling six more hikes in 2022 following an initial 25 bp, and this may include 50 bp moves before another four next year to a peak ranging between 2.75-3%, while chair Powell was bullish in the post-meeting press conference, and some members added more tightening to their SEP projections than the consensus. However, after a fleeting rebound, the Greenback retreated relatively swiftly and has subsequently lost more momentum almost across the board with the index holding just above 98.000 within 95.151-499 confines. Moreover, the DXY would arguably be even lower if the likes of the Aussie were in the basket, as it extends its resurgence on the back of an upbeat labour report. Back to the Dollar, jobless claims and ip are due, but may not impact much as the focus returns to Russia-Ukraine and US Treasury yields ease back from fresh peaks amidst further flattening and buy rumour/sell fact reaction in currency markets.

AUD/NZD/GBP

As noted above, further gains for the Aussie forged in wake of robust employment metrics as payrolls topped consensus, the jobless rate dipped, participation ticked up and the number of full time workers rebounded significantly following a fall last time. Aud/Usd scaled 0.7300 to open scope for an approach on Fib resistance in the form of a 61.8% retracement of the reversal from 0.7440 to 0.7165, while Aud/Nzd is probing 1.0700 as Nzd/Usd stalls around 0.6850 after marginally softer than expected NZ GDP data overnight. Elsewhere, the Pound is perky near 1.3200 vs its US peer and close to 0.8375 against the Euro awaiting independent impetus from the BoE at 12.00GMT when a 25 bp hike is anticipated, but vote split and tone of the MPC minutes and may be more insightful - full preview available via the Research Suite.

CAD//EUR/JPY/CHF

Some calm after the post-FOMC volatility and earlier fluctuations amidst mixed messages on the Russia-Ukraine front in terms of peace deal prospects. The Loonie retains a degree of post-Canadian CPI momentum between 1.2700-1.2650 with added thrust from a firm bounce in WTI crude and the Euro is forming a solid base above 1.1000 as EGB/UST spreads continue to converge, on balance and in corrective fashion, with more option expiry interest at the round number looking unlikely to factor (1 bn). Conversely, BoJ and SNB policy divergence vs the Fed and mainstream, along with verbal and physical intervention are keeping the Yen and Franc pressured, though off recent/latest lows just over 119.00 and circa 0.9430 vs their US counterpart. Note, little reaction to a wider Swiss trade surplus and acceleration in key watch exports or conflicting Japanese machinery orders.

SCANDI/EM

The Sek has lost some Riksbank vigour against the backdrop of waning risk sentiment, but the Nok is underpinned by the recovery in Brent and the Try awaits the CBRT with little hope of a boost in contrast to the Brl that got a 100 bp Selic rate hike from the BCB last night and a clear heads up for more to come.

17 Mar 2022 - 09:44- Fixed IncomeData- Source: Newsquawk