EUROPEAN FX UPDATE: Euro eyes expiries, while Aussie rues RBA rate rollbacks

Analysis details (10:26)

EUR/AUD  

A marked change in fortunes, or at least a part reversal of the recent divergent trend, as the Euro found more underlying bids into 1.0100 vs the Buck, but the Aussie was left somewhat deflated by mixed CPI and RBA inflation metrics that prompted a few banks to lower their RBA hike calls overnight. Eur/Usd remains prone to headline risk and especially the ongoing threat of a further reduction in NS 1 gas flows from Russia, but hefty option expiry interest could keep the headline pair propped on the one hand given 1.84 bn rolling off at the 1.0100 strike, and capped on the other hand as 1.63 bn resides between 1.0200-10. Back down under, Aud/Usd eased back below 0.6950 awaiting pointers from the Fed via guidance more than the rate verdict itself as another 75 bp rise is virtually priced in.

DXY/GBP/CAD

Aside from the Euro bounce, the Greenback gave up some ground against Sterling and the Loonie ahead of the FOMC, as Cable regained a solid footing on the 1.2000 handle and Usd/Cad eased back towards 1.2850 with some assistance from firmer oil prices in wake of a much larger than forecast draw in API crude stocks. As such, the index faded from Tuesday’s peak and pivoted 107.000 within a narrow 107.140-106.880 band pre-Fed and also several US data releases that could have an interim impact, including durable goods, advanced trade and pending home sales.

CHF/NZD/JPY

All sticking to tight lines and confines relative to their US counterpart, with the Franc inside 0.9650-00 parameters, the Kiwi equally compressed between 0.6251-21 and the Yen anchored around 137.00 within a 44 pip band, and looking toward the FOMC for fresh impetus in the absence of anything specific, bar a decent improvement in Swiss investor sentiment, until later in the week for the Nzd and Jpy. Note, month end rebalancing might be influential as it’s spot July 29 today, though many are likely to wait for the Fed before conducting business.

SCANDI/EM

The Nok made a firm break of 10.0000 vs the Eur, as Brent settled down somewhat, but the Sek remained steady irrespective of a swing in Sweden’s trade balance to surplus from a wider deficit after revision. Conversely, the Cnh and Cny pared declines against the Usd following the weakest onshore fix by the PBoC since mid-May and Wuhan city’s Jiangxia district locking down 1 mn inhabitants on the eve of a call between Chinese and US Presidents Xi and Biden.

27 Jul 2022 - 10:25- Fixed IncomeData- Source: Newsquawk