EUROPEAN FX UPDATE: Dollar returns refreshed and reset after three day rest

Analysis details (10:22)

DXY

The Greenback regained yield appeal thanks to catch-up trade in US Treasuries following the long Independence Day holiday weekend that took the form of bear-steepening, but the Buck also benefited from the frailty of others on a combination of fundamental and technical factors, plus the fact that spec long positions were pared back ahead of month, quarter and half year end to alleviate overbought conditions. The Dollar index bounced off a firmer base just above 105.000, at 105.040 vs Monday’s 104.810 low to breach the former y-t-d peak (105.790 from June 15) and top 106.000 with a new 106.110 best.

AUD

It seems almost unjust that the Aussie is underperforming given another half point hike from the RBA overnight and guidance for further policy normalisation, though buy rumour and sell confirmation of the widely expected move appeared to contribute to the retreat in Aud/Usd from almost 0.6900 through the round number below, not to mention the reversal in Aud/Nzd from around 1.1077 towards 1.1000. Moreover, there were elements in the accompanying statement that sounded a tad less hawkish, like the line that Australian inflation is high, but not as elevated as in other countries and it is forecast to peak this year before declining back towards the 2-3% range in 2023.

EUR  

The major faller, with Eur/Usd down to circa 1.0300 and Eur/Chf sub-0.9950, representing the weakest levels for the Euro since 2002 and 2015 respectively. For the record, mixed to firmer than anticipated Eurozone services and composite PMIs hardly impacted along the way as EGB yields retreated sharply and broad risk sentiment soured again.

NZD/CAD/GBP/CHF  

All making way for the Greenback’s post-July 4 resurgence, as the Kiwi gave up 0.6200+ status in wake of more worrying NZ survey-based news (NZIER consumer confidence sliding to -65% from -40% previously), the Loonie recoiled below 1.2900, Sterling let go of the 1.2100 handle irrespective of upgrades to the final UK services and composite PMIs, and the Franc fell from just above 0.9600 towards 0.9650.

JPY

The Yen fared better than the rest, but not before tumbling beneath 136.00 at one stage amidst all round buying interest in Usd/Jpy from funds, Japanese importers etc. However, the tables turned alongside the general market tone and when Jpy crosses reversed course markedly, with the headline pair retesting support into 135.50.

SCANDI/EM    

A pretty pronounced slowdown in Sweden’s services PMI may have hampered the Sek, but the Nok was hit harder in the face of more volatility in Brent and Norwegian oil sector strike action, while the Cnh and Cny lost impetus gleaned from the latest strong Chinese PMIs and talks with the US on trade, the economy and supply chains as the Usd scaled fresh heights.

05 Jul 2022 - 10:22- EnergyData- Source: Newsquawk