EUROPEAN FX UPDATE: Dollar softer across the board after post-PMI pop

Analysis details (10:14)

DXY/JPY

The Buck faded broadly irrespective of hawkish rhetoric from Fed’s Daly and Mester, as Japanese exporters jumped on last Friday’s spike in Usd/Jpy to set more hedges and the headline pair also recoiled amidst reports (subsequently downplayed) that the Government intends to review the BoJ’s inflation mandate to allow more flexibility in terms of reaching the 2% target. Meanwhile, IMM spec accounts pared longs significantly according to the latest weekly positioning update to leave Usd/Jpy prone to more downside from circa 136.61 to sub-136.00, and the Greenback exposed in general, with the index losing momentum just shy of the prior session high within a 104.830-120 range ahead of December’s NAHB Housing Market Index.

NZD/GBP/AUD/CHF

A recovery in risk appetite after last week’s series of rate hikes and downbeat macro releases, including US preliminary PMIs, retail sales and regional Fed surveys, helped the high beta, activity and cyclical currencies claw back losses against the Buck. Indeed, the Kiwi managed to probe 0.6400 in advance of NZ trade and Sterling reclaimed 1.2200+ status regardless of ongoing UK economic stress and strike action on stop and Eur/Gbp cross flow action. Meanwhile, the Aussie rebounded through 0.6700 on the eve of RBA minutes and the Franc took heed of latest Swiss sight deposit balances showing very little change at domestic banks on its way back beyond 0.9300 from around 0.9349.

EUR/CAD

The Euro lagged somewhat even though ECB speakers maintained hawkish guidance and Germany’s Ifo survey was firmer than forecast in all metrics, while the Loonie was also cautious pre-Canadian PPI in the face of choppy crude prices. However, Eur/Usd bounced from under 1.0600 to top 106.50 and Usd/Cad retreated from the high 1.3600 area towards 1.3630.

SCANDI/EM

Marginal Sek outperformance or Nok underperformance on fiscal grounds after a Norwegian expert body touted Nok 40 bn tax breaks to be funded via a rise in VAT, CO2 and housing levies, but the Zar sharply outpaced its rivals as Gold ticked back up towards Usd 1800/oz and SA President Ramaphosa won re-election as head of the ruling ANC party. Elsewhere, the Cnh and Cny flat-lined as China lifted more Covid controls and the US Treasury announced a nine-month extension of tariff exclusion on 352 Chinese import product categories to provide some comfort for sad news of two deaths from the virus over the weekend.

19 Dec 2022 - 10:14- Fixed IncomeData- Source: Newsquawk