EUROPEAN FX UPDATE: Dollar underpinned on rate rather than risk grounds

Analysis details (10:15)

DXY/JPY

Financial markets breathed a sigh of relief after a weekend almost free of bank distress to the point of no more bailouts or collapses, but the initial and early euphoria waned somewhat as yields rebounded relatively sharply from Friday’s safe have lows as a stark reminder of the funding and liquidity issues that caused a lot of the problems in the sector for those that failed in the last couple of weeks. However, the Buck retained an underlying bid and clawed back losses vs the likes of the Yen and Gold that were outperforming ahead of the weekend, with the Dollar index tightly bound around 103.000 within a 103.230-101.970v range, Usd/Jpy elevated between 130.51-131.36 parameters and Xau/Usd much more compressed sub-Usd 2000/oz. The Yen largely shrugged off slightly firmer than forecast Japanese services PPI, but may have lost some of its repatriation impetus, albeit temporarily given that spot month end looms on Wednesday and could see domestic participants return to the fray. 

CHF/GBP    

The Franc continued to regain composure after the Credit Suisse saga that could have spiralled into another global financial crisis according to Switzerland’s Finance Minister Keller-Stutter. Usd/Chf retreated towards 0.9150 from circa 0.9200 and Eur/Chf remained mostly under 0.9900 as the spotlight trained on EZ/EU banking names instead. Elsewhere, the Pound pivoted 1.2250 vs the Greenback and 0.8800 against the Euro awaiting CBI UK distributive trades and yet another speech by BoE Governor Bailey.

CAD/AUD/EUR/NZD

All marginally firmer vs their US counterpart, as the Loonie held just above 1.3750, the Aussie straddled 0.6650, the Euro formed a base within 1.0746-82 confines and the Kiwi kept close tabs on 0.6200. Note, Eur/Usd derived traction from a pronounced pull back in EGBs, though failed to glean any real momentum from the latest German Ifo survey revealing decent beats in the main metrics measuring the business climate, expectations and current conditions.

SCANDI/EM

The Sek was not unduly ruffled by Sweden’s narrower February trade surplus following hawkish comments from Riksbank Governor Thedeen on Sunday evening that prompted SEB to reaffirm its forecast for a 50 bp hike in April, but the Nok underperformed in corrective price action post-last week’s 25 bp Norges Bank rate rise and the Ils was undermined by a rift in Israel’s coalition on the very controversial judicial reform plan that PM Netanyahu told party heads he will hold back on. Meanwhile, the Try slipped further even though Turkish manufacturing confidence improved, the Zar fell in tandem with Gold and the Cny and Cnh had a slump in Chinese industrial profits to contend with. 

27 Mar 2023 - 10:15- Fixed IncomeData- Source: Newsquawk