EUROPEAN FX UPDATE: Euro feels PMI pain to the benefit of safer havens

Analysis details (10:32)

EUR/DXY

Not the only G10 loser, but the Euro was hit hard by big misses in preliminary French and German PMIs that preceded equally bleak and worrying pan outturns, predictably. This prompted a deeper reversal in Eur/Usd from a lower sub-1.0600 peak compared to yesterday and the headline pair subsequently lost grip of the round number below, while Eur/Jpy recoiled towards 142.00 from almost 144.00 at one stage and Eur/Gbp tested support into 0.8600 from circa 0.8641 as EGBs soared and yields cratered. Conversely, the Dollar index that was still licking wounds post-Fed Chair Powell’s testimony and a research paper flagging greater recession risks, rebounded firmly back over 104.500 within a 104.050-780 range awaiting US weekly jobless claims for the June NFP survey and the flash PMIs ahead of Powell part two.

NOK

The Norwegian Crown got a second wind via Norges Bank Governor Bache stating that bigger than 25 bp rate hikes cannot be ruled out in the future following its half point move that confounded forecasts for ¼ point and a loftier rate path that was offset somewhat by caveats and guidance that the next rise in August will likely be the standard 25 bp. Eur/Nok traded sub-10.4500 again between 10.5295-10.4400 or so parameters, but was underpinned by broader risk aversion and the ongoing weakness in Brent crude.

JPY

Another reprieve for the Yen amidst chat by an ex-MoF official who contended that the BoJ’s YCC has many negative effects and it’s clear that monetary policy is weighing on the Jpy. However, Usd/Jpy also experienced what some described as a ‘flash crash’ overnight that may have been flow-related on M&A grounds or merely further corrective price action.

CHF/AUD/GBP/NZD/CAD

All weaker vs their US peer and/or back in reverse gear as sentiment takes another turn for the worse on mounting inflation and growth concerns, with the Franc retreating through 0.9600 and 0.9650, the Aussie under 0.6900 again after another drop in commodity prices, Sterling swinging either side of 1.2200 with some support from a solid UK services PMI, the Kiwi trying to keep its head above 0.6250 and Loonie still defending 1.3000.

SEK/EM

Not much traction for the Sek via a pick-up in Swedish PPI, or the Huf as the NBH held the 1 week depo rate, while the Try looks resigned for more of the same unchanged policy from the CBRT, with an outside chance or call for a 100 bp ease and the Rub is taking on board CBR commentary indicating the potential for more rate cuts. Conversely, the Mxn anticipates another Banxico hike to deflect some of the angst from WTI.

23 Jun 2022 - 10:32- Fixed IncomeData- Source: Newsquawk