EUROPEAN FX UPDATE: Dollar revival stymies Sterling and knocks Kiwi over

Analysis details (10:26)

DXY/GBP

The Greenback regained some composure ahead of potential market-movers in the form of US retail sales and FOMC minutes after failing to garner more momentum amidst mixed macro releases yesterday, with the index recovering from 106.300 to trade at 106.730. However, the Buck made biggest gains beyond the basket and irrespective of external factors that looked supportive on paper or at first glance for certain peers, like a hawkish RBNZ hike overnight and partial recovery in the Yuan. Meanwhile, the Pound seemed set to rally on the back of UK inflation data beats, including an eye-catching 10.1% y/y CPI print that marked the highest headline rate since 1982, but Cable was capped into 1.2150 again amidst broader concerns about the economy as BoE rate expectations ramped higher.

AUD/NZD/JPY

Hardly surprising to see the Aussie prop up the G10 table following fractionally softer than forecast wage price metrics that prompted some paring of RBA tightening projections, but the Kiwi may well feel hard done by given the RBNZ matching consensus for a 50 bp rise in the OCR and lifting its trajectory for the benchmark policy rate to 3.69% by December 2022 from 3.41% previously, then 4.1% for both September and December next year vs 3.95%. Elsewhere, the Yen is succumbing to a further loss of yield premium allied to increasingly bearish technicals on top of another wider than anticipated Japanese trade balance alongside machinery orders missing expectations. Aud/Usd is floundering well under 0.7000, Nzd/Usd is hovering just over 0.6300 and Usd/Jpy probed the 21 DMA before waning into 135.00.

EUR/CHF/CAD

In stark contrast to the Yen, EGB underperformance vs USTs provided the Euro with enough traction to hold above 1.0150 against its counterpart, while the Franc continued to pivot 0.9500 and the Loonie consolidate around 1.2850 post-Canadian CPI readings that BoC acknowledged in context of a slowdown and perhaps indicative of a peak in inflation, but added that it will likely remain too high for some time.

SCANDI/EM

The Sek and Nok weakened amidst renewed risk aversion and downside pressure in crude, while the latter also took on board a marked deterioration in Norwegian Q3 consumer sentiment on the eve of the Norges Bank that is seen hiking rates by another 50 bp. Sticking with Central Bank policy, NBP's Litwiniuk said there is space to hike, but not much and if the government pours more money into the economy it will have to tighten policy further and will consider a rise in September, while a SARB parliamentary presentation noted second-round (inflation) effects now manifesting, risks tilted to the upside and inflation sharply higher, may be nearing peak, but return to target likely to be sluggish.

17 Aug 2022 - 10:26- Fixed IncomeData- Source: Newsquawk