EUROPEAN FX UPDATE: Euro elevated as Buck trades mixed vs other major rivals

Analysis details (10:15)

DXY/EUR

The Dollar index remained capped by psychological resistance around 102.000 even before the Euro got a boost from unexpectedly strong Spanish inflation data that lifted Eur/Usd towards 1.0900 from a low just above 1.0850, and the DXY only held off recent lows thanks to weakness/underperformance elsewhere within the basket. Moreover, the Euro coped well with a downside miss in German GDP given more recent signs of improvement in the Eurozone’s major economy that suggests it can avoid a technical recession, and the headline pair subsequently topped 1.0900 to the detriment of the index between 102.040-101.670 parameters.

AUD/CAD/JPY

At the opposite end of the G10 spectrum, cross-flows weighed on the Aussie along with declines in domestic and HK stocks, as Aud/Usd retreated from 0.7120 to 0.7069 and Aud/Nzd reversed from 1.0950 to the low 1.0900 area. Elsewhere, the Loonie continued to encounter heavy offers at 1.3300, but managed to contain losses through 1.3350 and the Yen stalled circa 129.21 before retracing to 130.29 amidst yet more dovish guidance from BoJ Governor Kuroda (must continue easy policy and maintain the 2% inflation target, as yet to foresee inflation stably and sustainably hitting the level backed by wage growth). 

CHF/GBP/NZD

All rangy and sitting tight vs their US peer awaiting this week’s major events that come thick and fast following the turn of the month via the FOMC, BoE, ECB and NFP. The Franc firmed up to probe 0.9200 from 0.9231 at one stage with some fundamental backing as the Swiss KOF came in firmer than forecast, while Sterling rebounded from 1.2370 to peer over 1.2400 and the Kiwi welcomed a considerably narrower than previous NZ trade deficit by having another look above 0.6500 from 0.6473.

SCANDI/EM

The Sek was undermined by a shock Q4 Swedish GDP contraction, with Eur/Sek climbing more than Eur/Nok in the face of retracement in Brent crude, but the Huf was hit even harder by S&P going one further than Fitch and cutting Hungary’s credit rating. Conversely, the Cny enjoyed catch-up gains on return from China’s LNY and the Try got another fillip from improved economic sentiment to complement rises in manufacturing and consumer sentiment.

30 Jan 2023 - 10:15- Fixed IncomeEconomic Commentary- Source: Newsquawk