EUROPEAN FX UPDATE: ECB ‘dove’ de Guindos gives Euro another boost

Analysis details (10:11)

EUR/DXY

The Euro was hovering around 1.0850 vs the Dollar following its midweek rebound with underlying support coming from further hawkish ECB commentary, as Wunsch upped the rate hike ante by suggesting that they could turn positive by the end of 2022. However, Eur/Usd and single currency crosses extended recovery gains on the back of remarks from the usually more dovish GC member de Guindos who said that a July move is possible, depending on how data pans out between now and then and prompted markets to price in three full 25 bp increases before year end. The headline pair approached 1.0900 with some caution given huge option expiry interest residing between the round number and 1.0905 (3.3 bn), but gathered momentum once the psychological mark was breached to probe several more chart-based upside levels, including Fib retracements at 1.0921 and 1.0932, the 21 DMA at 1.0925 today and a recent high at 1.0923 from April 14. Understandably, the Buck buckled in contrast and the index lost support at 100.000 to hit a 99.816 low from 100.580 high for a more pronounced pull-back after setting twin range peaks at 101.030 yesterday and Tuesday in advance of US jobless claims, the Philly Fed and Chair Powell at the IMF.

CAD    

Firmer oil, the Euro-related Greenback decline and lingering bid in wake of Wednesday’s stronger than expected Canadian CPI data are all keeping the Loonie elevated within a 1.2501-1.2458 range against its US rival, and at this stage 1.36 bn option expiries at the 1.2500 strike do not look likely to impact. Nevertheless, Usd/Cad could well respond to tomorrow’s macro releases out of Canada in the form of PPI and Retail Sales.  

JPY/NZD/GBP

Japanese officials stuck to the script at the G7 in terms of keeping verbal intervention focused on the magnitude and speed of moves rather than any pain threshold, so the Yen remains at the whim of yields and near term technical impulses to a lesser extent after the latest round of unlimited JGB buying designed to cap 10 year cash at 0.25%. Hence, hardly any positive reaction to the first upgrade in the Government's overall economic assessment and outlook for private consumption since the end of last year, as Usd/Jpy holds mostly above 128.00 between 128.64-127.80 parameters. Elsewhere, the Kiwi was somewhat underwhelmed by NZ Q1 CPI missing consensus, irrespective of the fact that it still hit 30+ year highs, with Nzd/Usd unable to maintain 0.6800+ status, while Sterling was undermined by Eur/Gbp advances and its fade ahead of a Cable trendline just shy of 1.3100, as the cross scaled 21 and 50 DMAs at 0.8348 and 0.8351 respectively on its way up to 0.8366.

CHF/AUD

Both barely changed vs their US counterpart, but choppy nonetheless in the absence of anything specific, as the Franc meanders from 0.9515 to 0.9457 and Aussie within a 0.7458-21 amidst mixed leads via Yuan weakness and Aud/Nzd tailwinds pre-preliminary PMIs.

EM

As noted above, further depreciation for the Cnh and Cny after another softer PBoC onshore fix overnight and China’s Securities Times noted that the Yuan has room to decline due to weaker exports, possible fund outflows from the EM region and faster rate increases by the Fed. Meanwhile, the Try has not been helped by a deterioration in Turkish consumer sentiment before CBRT minutes and the Zar has fallen through the 200 DMA, a Fib and cloud base. Conversely, the Rub has pared some losses with support from CBR Governor Nabiullina stating that the Bank is looking at FX controls to avoid a deviation of the Rouble from official levels.

21 Apr 2022 - 10:11- Fixed IncomeData- Source: Newsquawk